In recent months, the Communist Party’s corruption watchdog, the Central Commission for Discipline Inspection, has announced a series of investigations into senior figures in China’s semiconductor industry. The targets of these investigations include the former chairman of Tsinghua Unigroup, a state-owned chip-focused conglomerate, the former president of the China Integrated Circuit Industry Investment Fund (aka “Big Fund”), and the former head of the Ministry of Industry and Information Technology. These investigations follow a government audit of the Big Fund, affiliate funds and companies that received investments from these institutions.

Some speculate that the investigations are linked to the financial troubles of Tsinghua Unigroup and underline the perceptions among China’s senior leaders that the approach of throwing money at China’s semiconductor industry has fallen short of expectations.

The large sums raised by the Big Fund, and the state’s encouragement of broader investment and business activity in the semiconductor industry, have inevitably created wastage and opportunities for corruption. But malfeasance by individual executives does not necessarily mean that their investment decisions were unproductive. Much of the Big Fund’s largesse has gone to relatively successful firms like Yangtze Memory Technologies Corp, which was poised to become a significant player in memory chips and a serious competitor to market leaders Samsung and SK Hynix.

Despite limited success, Beijing has no prospect of meeting the ambitious goals for localising semiconductor production as set out in the Made in China 2025 plan published in 2015. China’s top leaders probably no longer see these targets as a realistic performance benchmark.

For the leadership, the current performance of ‘China Inc’ in the face of growing ‘decoupling’ pressures from the US and its allies is insufficient. This outlook was articulated in the Opinions on a New National System for Tackling Key Core Technologies under the Conditions of Socialist Market Economy, adopted by the Central Commission on Comprehensively Deepening Reform in September. The core message in this statement of policy guidance is captured below: