In the wake of new export controls issued by the Biden administration in early October, suppliers of chip-making equipment are stalling any servicing of Chinese chip factories. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) recently enacted what are said to be among the toughest the United States has ever enacted.
In recent years, Beijing has made China’s semiconductor development and manufacturing capabilities a priority, in part due to U.S. export controls limiting China’s access to U.S. technologies. Since 2010, registered semiconductor firms in China have increased by 700 percent, according to an analysis by the Financial Times.
The new BIS rule imposes complex controls on:
- Advanced computing integrated circuits (ICs)
- Computer commodities
- Semiconductor items and related manufacturing equipment
- Supercomputers
It also mandates stricter due diligence for U.S. businesses exporting to China.
Western suppliers must now rigorously investigate Chinese partners to ensure compliance. We used public records and graph analytics to compile and map 35,000+ companies in Chinese semiconductor networks to help suppliers better navigate this risky landscape.
The Chinese government prioritizes semiconductors
Semiconductors power modern technology, from cars and smartphones to telecommunications equipment. Design and manufacturing are dominated by a few firms in the United States, Taiwan, and Europe.
China has invested in domestic chips for decades. But under Xi Jinping, the Chinese Communist Party renewed efforts to create an independent semiconductor supply chain under the “Made in China 2025” plan. The goal: produce 70 percent of China’s semiconductor needs domestically by 2025.
The Chinese government directly or indirectly holds shares in 13 percent of Chinese semiconductor firms, reflecting this push for self-reliance. China’s State Council leads these investments, local governments also own shares in semiconductor firms, indicating a nationwide strategy.
Recent U.S. restrictions prohibit unlicensed exports of semiconductor parts to specific Chinese firms. These actions have increased the pressure on China to accelerate self-sufficiency.
Using graph analytics to map China’s semiconductor industry
In August of last year, we conducted an investigation into Chinese semiconductor companies that still serves as a great example of how Western companies can adapt to these new export controls. The framework below helps investigators uncover government involvement in ownership structures.
We identified 8,129 companies in our database with “semiconductor” (半导体) in their registered business purpose. (Note that this list only includes companies with records in the National Enterprise Credit Information Publicity System (NECIPS), China’s most up-to-date and comprehensive corporate registry.)
We traced ownership upstream three layers. This revealed approximately 35,000 unique shareholders. We then identified the state-run agencies and vehicles funding these firms.
Semiconductor firms concentrated in few regions
China’s semiconductor industry is concentrated on the tech-heavy eastern and southern coasts. More than half of the country’s semiconductor firms are located in Jiangsu Province, Guangdong Province, and Shanghai.
Jiangsu province, where over 2,700 firms are based, is home to Jiangsu Changdian (JCET) and many of its subsidiaries. JCET is one of China’s leading semiconductor designers and manufacturers.
State ownership concentrated in central government and major cities
About 13 percent of sampled companies are partially or wholly owned by Chinese government entities within three layers of ownership. Indeed, Chinese government entities may have indirect stakes in more semiconductor companies beyond three degrees of ownership.
Most are owned by the country’s central government via the State Council State-owned Assets Supervision and Administration Commission (SASAC). However, provincial, prefectural, and city-level governments — and their SASACs — also invest heavily.
Shanghai and Beijing municipal governments are the most active investors, likely due to the high concentration of talent in those cities.
Tracking Chinese government investment across strategic industries
The Chinese government invests in industries it deems strategic. Direct ownership of firms is one of many ways that the government puts money toward key industries.
Public records and graph analytics indicate that the Chinese government, at both the national and local levels, owns a substantial percentage of China’s semiconductor industry.
China’s corporate registries offer deep insights into ownership and business purpose. Running bulk ownership queries against companies with specific business purposes can be used to assess the level of state ownership in virtually any industry.
Want to learn more about conducting investigations in China? Watch our latest Master Class to learn how to uncover Chinese military companies with public data.
