"Unfinished" Dehuai Semiconductor, listed on Jingdong auction with a starting price of 1.667 billion yuan

Behind the frequent success stories of the localization of the semiconductor industry, there are also outright failures happening from time to time. In recent years, Dehuai Semiconductor, which has been rumored to be unpaid and unfinished, has recently appeared on the JD auction website and auctioned at a starting price of 1.667 billion yuan. The bidding announcement shows that this auction will be publicly auctioned on the Jingdong Auction Bankruptcy and Clearing Platform from August 6th to August 7th at 10 o'clock (except for delays).

The auction items include all of Dehuai’s movable and immovable properties, but do not include finished chips and chip raw materials. The detailed list of movable and immovable properties shows that the auctioned movable and immovable properties include 18 buildings including Fab1, power center, gas room shift dormitory, substation, office building, 62 sets of applied materials, Nikon, TEL, LAM, and other equipment, covering 171,300 square meters. Industrial land, and other electronic equipment and vehicles.

Part of the auction list

In addition to Dehuai Semiconductor, there have been many "unfinished" semiconductor projects in China. For example, Wuhan Hongxin, Chengdu GF, Chengxing Semiconductor, Shaanxi Kuntong Semiconductor, and so on. In 2020, Wuhan Hongxin, which was established in November 2017, was broken by the explosive capital chain. In November of the same year, it announced that it would be wholly owned by the government. Wuhan Hongxin once claimed to invest 128 billion yuan to build one of the largest chip manufacturing plants in China.

Government endorsement, frequent announcements of mass production but no products

In 2016, Dehuai Semiconductor was established in Huaiyin District, Jiangsu, with a total investment of 45 billion yuan. The legal representative is Li Ruiwei. According to the plan, Dehuai Semiconductor will build an 8-inch wafer fab in the first phase, which will mainly produce power management chips and micro-electromechanical system chips, with a production capacity of 40,000 wafers/month; the second phase of the project will build an 8-inch wafer fab and a 12-inch wafer fab. In fabs, the former focuses on the production of power management chips and radio frequency chips, with a production capacity of 60,000 pieces/month; the latter focuses on the production of self-developed CMOS image sensor chips, with a production capacity of 20,000 pieces/month. In addition, the project will also build packaging and testing plants, equipment remanufacturing plants, scientific research and design centers, IC design companies, and supporting living areas.

At the beginning of its establishment, Dehuai Semiconductors slogans "China's No. 1 and World's No. 2". The government endorsed everything and the semiconductor project seems to be able to proceed normally. Dehuai Semiconductor has also reported a "good news": In early 2018, the official website of the Jiangsu government announced that "the first phase of the Dehuai Semiconductor Project was officially put into operation", "In 2017, the revenue was 200 million yuan, and the expected revenue in 2018 was 2 billion yuan." The first product AR1337 released after semiconductor digestion authorized by ON Semiconductor has been mass-produced and supplied", "nearly 100 imported equipment has been installed in the factory"... In 2019, Dehuai 12-inch integrated circuit chip project was included in the list of major projects in Jiangsu Province, But until the announcement of the auction, Dehuai Semiconductor did not seem to be able to come up with relevant products that convinced the industry.

Li Ruiwei, the legal representative of Dehuai Semiconductor, is also a subject of much attention. According to the information, Li Ruiwei is also the legal representative of Nanjing Dekema, and the company has been filed for compulsory liquidation and bankruptcy in May 2020. The introduction of multiple government investments by Dehuai Semiconductor and Nanjing Dekema are all related to Li Rui. After Dekema started construction, Li Ruiwei invested only 1 million yuan. Because the promised investment was not in place, he finally announced his withdrawal.

CCTV has reported that by the end of 2020, Dehuai Semiconductor has less than 100 employees; 57 sets of equipment have entered the site, and 154 sets of equipment have not yet entered the site; Chairman and general manager Xia Shaozeng, deputy general manager in charge of finance, etc. Has not returned to the company for a long time.

The "star" has fallen and only survived for 5 years

In recent years, many domestic places have achieved excellent results in the semiconductor industry, and the entire industry has fallen into a state of excitement. Data show that in 2019, domestic integrated circuit-related companies added 53,000, a growth rate of 33.01%. Semiconductor players have flocked to accelerate the pace of localization. Judging from the cycle of chip projects, 2020 will be the "golden first year" of domestic chips.

Due to the attention of the local government, Dehuai Semiconductor was once regarded as a "star company" in the industry. If it follows normal progress, this "star company" also has the potential to become a "superstar". But five years after its establishment, the star fell.

·Why can Dehuai Semiconductor get a lot of financial support?

One is the promotion of favorable national policies. The semiconductor industry plays an important role in the national economic development process. For example, in 2020, Hefei Investment and Century Co., Ltd. cooperated to build Hefei's first third-generation semiconductor industry project. In that year, Hefei's annual output value exceeded one trillion. With the successful cases of the local semiconductor industry, Sichuan, Hubei, Guizhou, Shaanxi, and other local governments competed for semiconductor projects, taking the semiconductor industry as the pillar of GDP development, and "localization" has become the slogan of the times. According to statistics, the amount of investment in semiconductor projects that can be fully traced in the first half of 2020 alone amounts to 200 billion yuan.

In addition, according to related reports, Xia Shao, who succeeded Li Rui as the legal representative, spent 200,000 yuan to open up government relations and seek benefits for Dehuai Semiconductor. This may be the reason why the Dehuai Semiconductor project was carried out in the early stage and even mass production was reported.

·With complete policies and funds, why did Dehuai Semiconductor end up in failure?

Yin Zhiyao, chairman and chief executive officer of China Micro Semiconductors, once said that the company has three key elements to grow from an early age: technical products, operational capabilities, and cultural style. In the initial stage of the company, it depends on products and technology to develop and grow. When Dehuai Semiconductor was exposed that the production line had not been put into production, and the superior inspection was also "on the spot", it seemed that the end of this project could be foreseen.

According to many industry insiders, in 2019, Dehuai Semiconductor's equipment has been idle and the production line has not been put into production. Part of the so-called imported equipment is second-hand products purchased from Intel's Dalian factory. On the other hand, compared with first-tier cities, Jiangsu, where the semiconductor industry is just starting out, has relatively weak human resources and lacks scientific research capabilities. The introduction of technologies it relies on will only consume funds and fail to build competitiveness.

In the same year, Dehuai Semiconductor was exposed to wage arrears and litigation with a number of cooperative customers. The litigants included Shenzhen Zhuoling Technology Co., Ltd., Sinotrans Modern Logistics Co., Ltd., and Dashi Technology (Shanghai) Co., Ltd., etc. With project stagnation and customer loss, Dehuai Semiconductor is already in jeopardy at this time.

·After the "unfinished" DEHUAI Semiconductor, who will be the picker?

It is understood that another unfinished chip project in Jiangsu: the first phase of the project of Zhongjing Semiconductor has been changed to a warehousing and logistics base. Dehuai Semiconductor, which was auctioned on JD Auctions.com, has attracted much attention as to who will receive the order in the end.

It can be seen from the Jingdong auction website that the Dehuai Semiconductor infrastructure project has basically been completed. Xu Yuquan, deputy director of its working group office, also said that the completion rate of semiconductor projects has reached 90%, and some projects with mature and stable technology in the market can be found. Start the project first, about 3 billion yuan can start this project.

Dehuai Semiconductor has to wait for less than 3 billion yuan to find another way out auction. However, semiconductors do not rely on a few pieces of equipment. It requires advanced technology, professionals, and sufficient financial support. The receiver needs to have strong funds to avoid being "backlashed." It is worth noting that the supervisory agency of this auction is the People's Court of Huaiyin District, Huai'an City. If it is a court auction, this means that capital predators may have taken the bid, but this will have to wait for the final auction result to be known.

Dehuai Semiconductor Park

Industry insiders believe that there are two-way risks in the semiconductor industry: for local governments, speculators will become "back-ups"; for enterprises, if local governments support insufficient support, or only support basic land, and Insufficient funds, the project will not run and will be caught in a dilemma in the later stage.

Dehuai Semiconductor's unfinished business has once again focused the industry on the chaos in the chip industry. Before the iron pestle is ground into a needle, a lot of work is needed. Who is really building a semiconductor project? Time will naturally make the answer public, and the bubble will be squeezed out with the answer. With the standardized development of the industry, such chaos will eventually only become a development epitome of the era of semiconductor localization.