The latest indication of issues facing China’s semiconductor industry is the accusation of corruption leveled against chip tycoon Zhao Weiguo by the country’s anti-fraud watchdog. Zhao served as Tsinghua Unigroup’s chairman before stepping down.

After the government invested billions of dollars in projects that either stalled or failed, prominent players in the sector were under investigation for corruption last year.

There were no comments available from Tsinghua Unigroup and Zhao. 

The Central Commission for Discipline Inspection claims that Mr. Zhao “took the state-owned company he managed as his private fiefdom” in a statement.

According to the regulator, he gave his friends and family successful businesses to run, and he paid “significantly above market prices” for goods and services from businesses run by his associates.

It also states that prosecutors have been given Zhao’s case and will bring charges against him. Formerly a division of the esteemed Tsinghua University, where President Xi Jinping studied, is now Tsinghua Unigroup.

The state-backed business acquired a number of businesses over the past ten years to become one of China’s top chipmakers.

But under Zhao’s direction, it accumulated debt and missed several bond payments in 2020. In July of last year, the company finished a 20-month restructuring. This gave a consortium led by two state-backed venture capital firms control over it. At about that time, Mr. Zhao resigned from his position as Tsinghua Unigroup chairman. He was reportedly taken from his home by authorities for an investigation, according to Chinese media outlets.

Other prominent members of the Chinese semiconductor industry are also being looked into.

The US and China are embroiled in a bitter trade war over semiconductors, which power everything from mobile phones to military hardware.

No matter where in the world the chips were produced, Washington announced in October that it would demand licenses from businesses exporting them to China using US equipment or software.

The Netherlands announced earlier this month that in order to safeguard national security, it also intended to impose limitations on the export of its “most advanced” microchip technology. In recent years, China has made enormous investments to increase its domestic chip manufacturing capacity.

To lessen its reliance on the West, the nation established a new national $29 billion semiconductor fund in 2019.

(Adapted from BBC.com)

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