China is working hard to promote semiconductor industry integration, but the plan is on the front. According to the Financial Times (FT), a high-level merger plan involving semiconductor equipment manufacturers has been suspended. Many announced mergers are either unfinished or lack strategic value due to valuation differences, local political struggles and weak technical foundations.
People familiar with the matter revealed that the Chinese government has convened several chip equipment manufacturers this year to discuss the potential "super merger" plan, trying to integrate different technologies into a nationally-led semiconductor equipment giant.
The plan is led by the National Development and Reform Commission (NDRC) and aims to promote the integration of Chinese semiconductor industry under the United States' continued implementation of high-tech export controls. However, due to the disagreement between companies and investors on ownership structure and valuation issues, the overall debate between these chip equipment manufacturers has been suspended.
According to Jefferies semiconductor analyst Edison Lee, if the chip equipment industry can be successfully integrated, it will help China build an independent semiconductor supply chain, and then replace equipment suppliers such as Applied Materials and Colin Research.
Currently, if Chinese crystal mills want to purchase local equipment, they often need to purchase from multiple manufacturers, but these equipment lacks integration. Edison Lee said that a single product company is difficult to succeed, and the crystal factory is more inclined to purchase multiple machines from the same supplier, which is more convenient to use.
Bernstein semiconductor analyst Lin Qingyuan pointed out that China's official perception is that the funds are too dispersed, which is difficult to generate scale economy and drive industry profits. Now it is a concentrated resource to support a small number of national team enterprises with international competitiveness.
Reporting said that the goals of the parties involved in the negotiation are not consistent, and the seller currently does not want to sell the assets at a price lower than the market value; the potential buyer does not want to pay more than its estimated value, which makes the large-scale consolidation consolidation shrink and the expected final result will be smaller than the initial expectations.
In fact, in the past few years, there have been many cases of failed projects or downturns in Chinese semiconductor industry. In this regard, the authorities are turning to encouragement purchases (M&A) rather than initial public offerings (IPOs), hoping to concentrate resources on a small number of enterprises with national strategic intentions, and no longer have to diversify weak investment quality.
According to the Financial Times statistics, only 8 originally announced transactions have failed so far in 2025. China Electronic Design Automation (EDA) Dragon Head Empyrean Technology announced in March that it would purchase smaller rivals, "Core and Semiconductors", in hopes of expanding its tool set, but the deal ended last month because it failed to reach a agreement. It is understood that the differences between the two parties in valuation are still the biggest obstacle.
However, there is still some good news, such as Naura Technology, the largest chip equipment manufacturer in China, has invested US$235 million and acquired 9.49% of the shares of Tongyi Xinyuan Micro.
Financial data supplier Wind Data shows that as of this year, China has announced 26 semiconductor industry mergers and purchases. Among them, the most popular target is the major asset reorganization of chip manufacturer Haiguang Information and supercomputer Inspur.
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