China Hit Some Bumps on Its Road to Semiconductor Dominance

Don’t be fooled into thinking that China is missing its goal of becoming the world’s largest semiconductor chip maker. That’s the conclusion some are drawing from troubles like the bankruptcy of national champion Tsinghua Unigroup and the high-profile arrests of several officials and executives. If China fails, the argument goes, why is Washington embarking on an expensive industrial policy to subsidize domestic semiconductor manufacturing?

This analysis is emblematic of the Western habit of underestimating the strength and resilience of China’s economy, political system and industrial strategies. China’s statist approach suffers from endemic waste, misallocation of capital and corruption. China is not guaranteed to succeed just because Beijing wants it to. But the notion that these arrests and bankruptcy signal China’s failure is devoid of any evidence.