How can a team with a college degree save up a “100 billion chip” scam?
Interview with Qiu Xiaofen and Su Jianxun
By Su Jianxun and Qiu Xiaofen
Editor: Yang Xuan
Why is it that after only one month, the precious “lithography machine” that we have worked so hard for is mortgaged out for money? This makes the management of the chip company “Wuhan Hongxin semiconductor” (hereinafter referred to as “Hongxin”), especially the newly hired CEO and industry leader Jiang Shangyi feel very wrong.
Lithography machine is the key equipment for manufacturing chips. Only a few enterprises in the world can produce it, among which ASML technology of Dutch company is the most advanced. However, due to Sino US economic and trade frictions, according to Reuters, since 2018, the US side has repeatedly lobbied the Dutch government, hoping that the Netherlands would not allow ASML to export high-end lithography machines to China, causing domestic chip manufacturers to “have no money to buy”.
Tao Yong, an employee of Hongxin, still remembers the scene when the sun engraving machine was in place on December 22, 2019: in a factory building on Wang’an Avenue in Wuhan lingkonggang Economic Development Zone (Dongxihu District), five workers carefully transported a huge object into the constant temperature workshop, this model is NXT:1980Di Our lithography machine is wrapped in sealed bags. In order to prevent oxidation, the workers also injected inert gas into the bag to keep the whole process of liquid nitrogen fresh.
Lithography machine into the factory, Hongxin like a treasure. On the same day, an entrance ceremony was held for this lithography machine. On the fiery back plate, it was written “Hongxin serves the country and realizes the dream of China”. Among the group photo taking, Jiang Shangyi, the second leader of Jidian at the front desk, stood.
“Hongxin has a Jiang Shangyi, and Jiang’s father has a photolithography machine.” all these are the top events in the semiconductor industry in China.
Jiang Shangyi, 74, is a leading figure in the semiconductor industry. In the industry, Jiang Shangyi is known as “father Jiang”. “TSMC has a lot of uncles and uncles, but there is only one ‘father’,” one person in the industry told krypton 36 In June 2019, Jiang Shangyi joined Hongxin.
Taking down the lithography machine, Jiang’s face played a huge role.
Some Hongxin people once asked Jiang Shangyi why he could get the lithography machine. Jiang Shangyi replied, “we signed hundreds of them at TSMC. Which one of them is not familiar with us? It’s only in the face that we’re willing to sell the first one. ”
Face is not enough. The person told 36 krypton that due to ASML’s limited production capacity and extremely strict external supply conditions, ASML will send a team of more than 10 people to the customer’s factory to inspect the site even if they accept the order, so as to judge the buyer’s technical blueprint and financial status by “scoring system”.
Still relying on Jiang Shangyi, Hongxin soon got the opportunity to accept the investigation. In December 2019, Hongxin obtained a new DUV deep UV lithography machine.
For a time, Hongxin company, which was established for only two years at that time, has enjoyed the best in a number of new chip projects launched in recent years. And the ambitious goal it had set before – focusing on the 14nm process at first, and then on the 7Nm, with a monthly production capacity of 30000 tablets. In the industry, only TSMC and Samsung can achieve it – seems to be no longer so dreamlike.
But what Jiang Shangyi didn’t expect was that the lithography machine he had worked hard to get was mortgaged into the bank for money less than a month after he entered the factory.
Tianyancha showed that on January 20, 2020, Hongxin mortgaged the introduced ASML lithography machine to Wuhan Rural Commercial Bank, with a loan of 580 million yuan. In the mortgage information column, it was said that the lithography machine was “brand new but not used”.
“Father Jiang began to feel something was wrong.” Lin Xiong recalled about 36 krypton. He was an early member of the Hongxin team.
In June 2020, Jiang Shangyi, who was frustrated, planned to resign from the position of director and CEO of Hongxin. At that time, Jiang Shangyi and Hongxin’s board of directors had broken up. In order to retain Jiang Shangyi, Hongxin’s board of directors showed a ferocious face.
A person familiar with the matter told 36 krypton that Li Xueyan, then chairman of Hongxin, in order to block Jiang Shangyi’s departure, indicated that she would send a lawyer letter to sue him, “to write Jiang’s father very ugly, and to attribute all Hongxin’s failures to Jiang’s father.”
Under all kinds of obstruction, Jiang Shangyi could not get away, and even once became a puppet of Hongxin. On July 8, 2020, Hongxin held a “staff commendation conference”, in which Jiang Shangyi was asked to present awards to employees. Hongxin officially released a group photo of Jiang Shangyi, Li Xueyan and others, which was very popular and harmonious.
The picture shows the group photo of Hongxin commendation meeting in July 2020, with Li Xueyan and Jiang Shangyi on the left 7 and 8. The picture is from Hongxin official website
After the event, Jiang Shangyi quickly left Wuhan and then returned to his residence in the United States. “My experience in Hongxin was a nightmare,” he told the South China Morning Post
One month after Jiang Shangyi announced his resignation, a local government document revealed Hongxin’s tragic situation. On July 30, 2020, the Dongxihu District Government of Wuhan City, where Hongxin is located, officially issued a report, which clearly pointed out that Hongxin project “has a large capital gap and faces the risk of project stagnation caused by the rupture of capital chain at any time”.
Lu Haitao, the person in charge of Wuhan torch Construction Group (hereinafter referred to as “Torch”), an engineering general contracting company that failed to collect debts from Hongxin, angrily denounced many local officials: “why do you say (Hongxin) has invested 100 billion yuan? That’s a liar
What is puzzling is that the first few members of Hongxin had no semiconductor industry background, and even most of them had college degrees. How did they cheat the Wuhan government, performance champion Jiang Shangyi, and many cooperative companies into this “100 billion scam” step by step?
More importantly, for many local governments and funds eager to “build cores”, how can they avoid stepping into the “Hongxin type scam” again?
Hongxin construction site, shot by Qiu Xiaofen, 36 krypton
Layman team makes chip Bureau of 100 billion
It is very difficult to find people, technology authorization and government to build a chip project. But because the chip business needs land, factories and machines, each link involves hundreds of millions of huge funds. Once speculators succeed, the returns are tempting.
Wuhan Hongxin, which has a big story and involves a high amount of money, is such a bold project.
Cao Shan, the earliest player of Hongxin. In 2017, Cao Shan tried to set up a semiconductor project. A person familiar with the matter told krypton 36 that in order to find a local government willing to cooperate, Caoshan usually travels among the provincial capitals, including Guangzhou, Hefei, Chengdu, Nanjing and other places, but in most cases, he encounters a wall.
In Lin Xiong’s impression, Cao Shan is full of big talk and has the spirit of the world. In order to package himself, Cao Shan often carries a number of business cards, including “vice president of TSMC”, “Acer’s first vice president in New York”, etc. However, lies are often exposed because “TSMC’s vice president is not named Cao Shan” and “Acer has no company at all in New York.”.
Many people who have contacted with Caoshan told krypton 36 that “Caoshan” is not even his real name. His real name is Bao enbao. Caoshan borrowed the name of the driver from his hometown. “I’ve done too many things, so I use pseudonyms outside.” A person familiar with Cao Shan told 36 krypton.
On the eve of setting up Hongxin, Cao Shan met another key figure, Long Wei.
Long Wei, the secret operator behind Hongxin. Many Hongxin insiders told 36 krypton that Long Wei was “very energetic”. With the help of Long Wei, Hongxin opened the door of Dongxihu District Government in Wuhan.
In order to control the real power of the company, Long Wei recruited Li Xueyan, who is close to him, to be the director of Hongxin. Li Xueyan’s working experience has nothing to do with chips. She has sold liquor, opened restaurants and sold Chinese medicine. Long and Li also put a number of confidants in Hongxin for key positions, such as Li Yueru, a board supervisor. Some insiders said that he was previously a “close nurse” responsible for taking care of Li Xueyan’s daily life.
An absurd initial team was formed: Long Wei with “background” served as the chairman, Cao Shan as the director, and Li Xueyan as the director and general manager. The founding team of such a 100 billion level semiconductor project has a college degree, and Cao Shan himself has only a primary school diploma.
Unexpectedly, under the operation of long, Cao and Li, Hongxin quickly gained momentum: on November 12, 2017, Caoshan established a company called “Beijing light blueprint”. Four days later, as a 90% shareholder, light blueprint and Wuhan Dongxihu District Government jointly established Hongxin.
Since then, the hidden danger has been buried: it seems that the government of Dongxihu District in Wuhan bears very little risk. As a 10% minority shareholder, it only injected 200 million yuan of start-up capital at this time, which is only a small number among the chip projects that are prone to invest 10 billion yuan. However, the problem is that it holds 90% of the shares. Although long, Cao and Li’s blueprint for light quantity put forward at that time, they promised to invest 1.8 billion yuan In fact, there has been no actual payment of the money.
From 2017 to 2018, the paid in capital of Beijing light blueprint established by Cao Shan and Li Xueyan is 0, and the data is from tianyancha
However, this does not prevent a short year, Hongxin quickly become a star project in Wuhan. Since 2018, Hongxin has been listed as a major special project of Hubei Province for two consecutive years. Externally, Hongxin introduces itself as a project with an investment of 20 billion US dollars / 130 billion RMB.
Grain and ammunition from Dongxihu District government also quickly followed up. According to the document issued by Wuhan development and Reform Commission, Hongxin, which was established only one year ago, has completed 6.5 billion yuan of investment in January 2019; by March 2019, Hongxin will have received more than 1.5 billion yuan of investment in one month. All these investments come from the Dongxihu District Government of Wuhan.
It is puzzling that why Hongxin can get these funds? After all, Hongxin team’s initial mistakes and omissions in technology and operation surprised people in the industry.
For the wafer factory, the initial technical route is almost a life and death link. Cao Shan’s first technical direction for Hongxin was to produce chips in the process of 90 μ m to 7 nm. He also set an iron and steel like goal: “to become a wafer factory next only to TSMC and Samsung.” But as long as anyone who knows the law of semiconductor development knows, no wafer factory can produce chips that span 13 generations at the same time.
According to the law of semiconductor industry, chip manufacturing should gradually develop from the entry-level 65nm and 40nm to the more difficult 14nm. However, Hongxin claimed to specialize in 10nm and even 7Nm chips as soon as it came up.
A Hongxin employee once asked Cao Shan, “why do you want to fly before you learn to walk?” Cao Shan replied: “to make 65nm chips, the project is only worth 8 billion, and to make 14nm chips is worth 120 billion, so there is more oil and water.”
Why did Wuhan Dongxihu District frequently invest in and rush to start chip manufacturing projects at that time? Lin Xiong’s analysis of 36 krypton is partly due to the fact that the chip project “Changjiang storage” launched by Ziguang group in 2016 in Wuhan East Lake New Technology Development Zone across the river is booming. The project later realized the mass production of 64 layer 3D NAND flash chips. Wuhan Dongxihu District has also made an industrial plan: to build an industrial cluster of “core, screen, intelligence, network and new”, and “want to be a wafer factory to connect the upstream and downstream of the industrial chain”.
A senior investor in the semiconductor industry in Shanghai told krypton 36: “it’s hard for local governments to be rational. You can see that everyone is doing [chips]. Why can’t I do it? It can’t be said that you can do it, but I can’t do it. ”
However, to hold up the Hongxin layout, the three are bound to show their feet. In order to make a real show, long, Cao and Li urgently need a solid technical team.
Surprisingly, they did.
Concept map of office building released by Hong Xin official account
Money makes the devil go
In 2019, Cao Shan once again developed his contacts. He found a company called “Shanghai Jingtai”. The company has close cooperation with large chip manufacturers such as TSMC, and is good at buying and selling second-hand equipment, which is quite “easy to eat” in the circle.
Cao Shan let Shanghai Jingtai act as a broker, and the two sides signed a contract worth tens of millions: Jingtai needs to help Hongxin gather 100 senior technicians from Taiwan and other places, and the higher the level, the more commission Hongxin will pay. Lin Xiong told 36 krypton that at that time, the Commission offered by Hongxin was “if we can dig up Jiang Shangyi, we will give him 1 million yuan, and if we find a deputy (factory director level), we will give him 500000 yuan.”.
Driven by money, Shanghai Jingtai, through layers of relationships, repeatedly contacted Jiang Shangyi, who just ended SMIC’s term of office at that time.
Jiang Shangyi was deceived by Cao Shan and others.
Hongxin team knows the way of packaging. Inside Hongxin, there are always rumors about the background of the founding team: Long Wei is “the grandson of a senior cadre” and Li Xueyan is “the sister of a leader”. They often play the drama of saying they are still retired. If anyone mentions their mysterious identity, they will be denied face to face and shirk the rumors spread by other members of the team.
On the other hand, long, Cao and others deliberately create a halo of identity. Lin Xiong told 36 krypton that when Cao Shan and others went to Taiwan and other places to seek the entry of technical teams, they often used the banner of high-level government to cheat, claiming that “the mainland is willing to invest 100 billion” in Hongxin project. In order to make a real joke and increase persuasion, Long Wei will also take the technical team in and out of some hotels that he claims “can only go with background”.
In 2018, a high-level government official visited Wuhan. Lin Xiong remembers that Li Xueyan mysteriously told the employees that the high-level government official would secretly visit Hongxin factory to encourage everyone to “make Chinese logic chips”. However, careful staff later found that the high-level did not visit Hongxin after verification. What Li Xueyan said was false.
When Jiang Shangyi received the invitation, the news that Hongxin actively released and got 100 billion yuan of investment had been overwhelming. In addition to the first phase of the project, which was nearly completed, in the summer of 2019, “Jiang dad” decided to join.
“If it’s Jiang Shangyi who wants to do it, his technical ability is very attractive to the market,” once an investor of guozitou chip told the media. However, based on the Hongxin rumors circulating in the capital market, “I’m afraid Jiang Shangyi was cheated.”
Under the endorsement of Jiang Shangyi, a large number of engineers come here, and Hongxin does not hesitate to retain talents by doubling the salary. Lin Xiong told 36 krypton that in the engineering team, “there are a lot of 3 million and 5 million (annual salary)”. At the peak, the number of employees of Hongxin expanded to more than 400.
It is because of Jiang Shangyi and the technical team that Wuhan Hongxin is able to buy a lithography machine. This cannot be achieved by the previous layman team. Some employees remember that the chairman Li Xueyan once gave advice to the team who could not solve the problem of lithography: “invite ASML to China for dinner, give them gifts and Chinese calligraphy and painting.”.
Tao Yong remembers that Holland’s lithography maker ASML gave high praise to the engineering team of Hong Xin, when Tao Yong said to 36 krypton, ASML was the best team they saw in Chinese mainland.
Although this game looks bright at this time, it seems that there is a hope of success, but for those who want to do it, the “save game” as a chip is only a cover for money.
Wuhan Hongxin timeline is compiled by 36 krypton based on public information and interview information
Swindler’s gold pocket
The high paid engineers went to Hongxin’s factory and soon found something wrong with Hongxin’s factory.
Some people familiar with chip manufacturing have actually surveyed Hongxin’s factory and found that Hongxin’s factory has problems such as misaligned central axis, insufficient emergency power reserve and so on. “The land is uneven, and the built chip factory will be scrapped within two years.”
There is also a lower level error. Because the height of Hongxin factory is too low, the later lithography machine can not move in, so it can only push up the ceiling again to strengthen the load-bearing of the floor.
Hongxin engineers have come to the conclusion that a group of people who don’t understand have designed a completely useless factory.
Several Hongxin employees told 36 krypton that in order to build the plant quickly, Cao Shan, a member of the saving bureau, asked for the old plant drawings of SMIC international from a design institute, and directly imitated and built the Hongxin plant. However, Torch Group, the general contractor of Hongxin’s project, did not have any experience in the construction of chip plants, and even had many lawsuits, with hundreds of millions of defendants in the court.
Cao Shan once said to people around him: “the chip is too complicated. I don’t really want to make a chip. I just want to build the factory building. We are familiar with civil engineering, so we can start with it. ”
Lin Xiong told 36 krypton that it is a common way for semiconductor companies to transfer funds in the name of “building a factory” and “encircling money”. “First of all, we can get financial subsidies from the central government or the local government to build a factory. In addition, we need to find a contractor to build a factory. In order to ensure the performance of civil engineering tasks, the contractor will pay hundreds of millions of yuan of deposit.” Lin Xiong said.
In other words, building a factory can be tricked at both ends.
Not only cheat the government of investment, contractors and subcontractors also become the target of Hongxin.
On December 20, 2019, Wang Liyin, the person in charge of “Wuhan Huanyu foundation engineering company” (hereinafter referred to as “Huanyu”), called Lu Haitao, the person in charge of “Torch”, the general contractor, to urge a project payment of 2 million yuan. However, he was told by the latter: “the arrears have been overstocked by 70 million yuan, and they have not been approved.”
Procrastination does not return, Hongxin gives a variety of excuses. Make complaints about the contract’s reformulation, for example, “untidy and messy”; if you call the financial center, the other side will be “leading the mobile phone to forget the car” as a reason to prevaricate; the torch chief also told the people around the world that he was directly in debt, “the cost of high-speed mold (a template process) about 20000000, Hong Xin did not acknowledge the bill.”
According to several receipts obtained by 36 krypton, during 2019, Hongxin and torch, the general contractor, had many large capital exchanges. Strangely, on May 30, 2019, torch paid 435 million yuan to Hongxin.
There are many strange accounting transactions between Hongxin and torch. The picture is on May 30, 2019. As the torch of Party B, it remits 450 million yuan to Hongxin. The picture is provided to 36 krypton by Huanyu
As the torch of Party B, why pay for Hongxin? A person familiar with the matter told 36 krypton that because Hongxin promised to pay torch the excess interest on the loan, torch voluntarily borrowed money from the bank as a guarantor and then transfused blood to Hongxin.
This practice has also made the torch bogged down. As Hongxin was unable to repay in time in the later period, as the guarantor, torch also advanced a total of 11 million yuan of loan interest for Hongxin. On the phone, Lu Haitao, the person in charge of the torch, repeatedly yelled at Hongxin: “these people have problems. The subcontractors hate them to death.”
On January 21, 2020, only three days before New Year’s Eve, Lu Haitao, the person in charge of the torch, made seven calls to Li Xueyan, none of which was connected.
He was burning with anxiety. As the 50 million yuan farmers’ wages have not been settled, hundreds of workers who have not yet returned home are in a hurry. They gather on the construction site and see the hard year’s wages come to nothing. The worst happened. During the day of January 22, workers rushed into the Dongxihu District Government in Wuhan, “the police can’t stop them.”.
Contradictions have intensified, Hongxin is still reluctant to lend. It wasn’t until 10 p.m. on January 22 that Hongxin finance reluctantly promised to pay 12 million yuan, and it was grinding to 4 a.m. again, this plan was overturned by Hongxin. Hongxin said that it could only pay 8 million yuan, and the remaining 4 million yuan had to wait until the seventh day of the Lunar New year.
The two sides were deadlocked over the payment plan, and Lu Haitao was completely angered. He said to the government staff present at that time, “I invite you to detain me for 15 days and give an account to the workers.” I report it. I call the mayor’s hotline to report the situation to the urban Committee. ”
The farce also spread to Hongxin, and the employees talked about it. In order to appease the employees, Li Xueyan repeatedly reiterated that Hongxin is absolutely safe. From time to time, she emphasized to the employees that any problem of Hongxin can happen, but money is absolutely not a problem.
“There is not a word of truth in Hongxin’s mouth,” Lu Haitao said indignantly.
In fact, money is definitely a problem.
Accounts that don’t match
When Hongxin was founded, in the overwhelming news, Hongxin was the son of Tianxuan who planned to invest 130 billion yuan, but in the end, he couldn’t even come up with 2 million yuan.
So, does Hongxin have any money? Where’s the money?
Based on interviews and public information, krypton has roughly sorted out a record of two years and seven months’ large revenue and expenditure from Hongxin’s establishment in November 2017 to Jiang Shangyi’s resignation in June 2020
Wuhan Hongxin large income, expenditure, debt statistics according to interviews, public information
In terms of revenue, according to documents previously released by Wuhan development and Reform Commission, Hongxin’s total investment as of December 31, 2019 has reached 15.3 billion yuan.
It’s more than that. In order to get more money, Hongxin continued to mortgage the real assets such as land and lithography machine, of which the lithography machine took 580 million yuan. In addition, a person familiar with the matter presented evidence to 36 krypton, proving that Wuhan Hongxin had secured the torch group, the general contractor of the project, and successively withdrawn about 700 million yuan of loans from local banks.
There are a lot of money in the bag, and Hongxin’s expenditure is extremely limited, which roughly accounts for Hongxin
1. The civil engineering cost of Hongxin phase I project is 1.7 billion yuan (experienced engineering contractor told 36 krypton that Hongxin factory is worth 2 billion yuan at most in the civil engineering of phase I project);
2. It costs nearly 800 million to buy the lithography machine;
3. Hongxin didn’t spend money to purchase production machines other than lithography machines, and the factory hasn’t been put into operation, so it didn’t generate R & D and sales expenses;
4. The remaining large amount of fixed expenditure is mainly personnel wages. Considering that there are only less than 500 employees in the peak period of Hongxin, the average monthly salary of the semiconductor manufacturing industry is 10000 yuan. Even considering the higher salary of senior technical personnel, if the operating time of two years is roughly calculated, the employee expenditure should not exceed 400 million yuan.
At the same time, Hongxin also owes a lot of foreign debts. According to 36 krypton, Hongxin has not settled the accounts with Jingtai, torch and other professional contractors.
It is estimated that if all the 15.3 billion investment funds are in place and all the debts have been settled, Hongxin’s account should have about 12.4 billion yuan left. But where is the money?
Tianyancha shows that in September 2020, in a lawsuit between shengpin precision gas (Shanghai) Co., Ltd. and Hongxin, the balance in Hongxin’s account was sealed up. The verdict showed that only about 15 million yuan was left in Hongxin’s account at that time.
Even the insiders of Hongxin don’t seem to have a solution to this problem. 36 krypton visited many senior executives of Hongxin in Wuhan, and no one could explain how Hongxin got to the situation of capital drying up.
In the investigation, 36 krypton found that Hongxin had a complex interest binding relationship with a number of in vitro companies.
Take one of the companies named “Foshan Hanhe” as an example. Hanhe is a consulting company of Hongxin in name, but in fact it transfers benefits in the name of training employees / consulting. Tao Yong told 36 krypton that Li Xueyan’s younger brother, Li Xuesong, was the operator of the Han Dynasty team.
Lin Xiong also told 36 krypton that Hanmo has recruited many chip engineers from Changjiang storage, TSMC, liandian and other companies through intermediary companies.
The daily work of these engineers is to write the technical data of their former owners into ppts, which are finally packaged and sold to Hongxin by Hanhe.
In order to cover up this kind of transaction, all the engineers participating in the training use pseudonyms, “Xiao Mao, Xiao Feng and Xiao Zhu”. In order to confuse the public, Han also mixed other contents in the training, such as letting the engineers learn the success of Nike and reading the romance of the three kingdoms.
Although they don’t do their jobs, the monthly salary of these engineers is as high as 150000-300000, which is funded by Hongxin in the name of “technology authorization”.
The end result is that the company, which is supposed to have received high investment, will soon be short of money everywhere.
According to Hongxin’s original plan, the first phase of the plant was supposed to start operation at the end of 2019, but at that time, the procurement of Hongxin’s most important production equipment had not yet started, “all stuck in the last link of finance.”. The response from the financial department is that “money will come in by January 2020”, but this period has been delayed to March, April or even later.
Chip manufacturing has been suspended for a long time. In April 2020, Tao Yong received a puzzling task: the board of directors of Hongxin asked 11 management levels, including CEO Jiang Shangyi, to prepare development plans of various departments, “giving a very broad proposition, everyone should write a telephone book as thick as that, and also report to the board of directors.” Tao Yong said to 36 krypton.
This work is obviously a cover up. When the management finished their respective reports on the plan, no one in Hongxin’s board of directors questioned it. However, after the meeting ended, they told the whole staff, “the plan is not written right. Everyone rewrites the second draft.”
It is worth noting that in April 2020, the Wuhan Municipal Development and Reform Commission issued the plan of major municipal projects under construction in Wuhan in 2020, which states that the investment of Hongxin in 2020 is 8.7 billion yuan.
After another executive meeting like the emperor’s new clothes, Jiang Shangyi couldn’t bear to scold Li Xueyan. He was a little excited: “we take Hongxin’s salary and do things worthy of Hongxin. It’s a waste of time to write these things (plans),” I order you not to write anything as CEO
This is the first time that Tao Yong sees Jiang Shangyi angry. After the conflict with the board of directors of Hongxin intensified completely, in June 2020, Jiang Shangyi quickly resigned from the board of directors of Hongxin, and then left Wuhan.
Jiang Shangyi’s departure became the last straw to defeat the camel.
In July 2020, Wuhan City revealed the fact that Hongxin’s capital was broken. In October, the national development and Reform Commission said that for the phenomenon of chip projects failing, it will guide local governments to strengthen their awareness of the risks of major project construction. According to the principle of “who supports, who is responsible”, those who cause major losses or cause major risks will be notified for accountability.
Who is the ultimate loser?
After investing 15.3 billion yuan in this project, Wuhan Dongxihu District government has to deal with the mess. In November 2020, Wuhan Dongxihu District acquired the light blueprint, which holds 90% of Hongxin’s shares, and took over Hongxin completely. Tao Yong told 36 krypton that after taking over Hongxin’s mess, the government dismissed Li Xueyan and sent a lobbying group to Shanghai and other places to seek acquisition. However, this project is unlikely to come back to life, because most of Hongxin’s employees have found a way out and just wait to take the opportunity to quit after getting the year-end bonus.
Wang Liyin of Huanyu is still running around for the final payment of 40 million yuan. In the past year and a half of debt collection, he has been running around, trying to write to Li Xueyan, contacting the court and the district government, but he has not received a satisfactory response. Because of this money, his Huanyu company is on the verge of bankruptcy.
On the torch side, in order to recover the arrears, since September 2020, it has been pretending to “fully resume work”. In fact, it has called on a small group of workers to help Hongxin do the “facade work” of painting exterior walls and dismantling scaffolds every day.
In December 2020, at Hongxin construction site, there are workers in the “construction” by Qiu Xiaofen, 36 krypton
In the recording of 36 krypton’s phone call, Wang Liyin and Lu Haitao all said that they had heard the rumors that Hongxin absconded with money, and the government was also on the alert. “A friend went to the Dongxihu government for confirmation, and the government replied that Hongxin rolled up part of the money and left.” Wang Liyin said so.
According to Tianyan survey, in May 2019, Long Wei, chairman of Hongxin, and Cao Shan, director of Hongxin, withdrew from the management of the company. After leaving Hongxin, Cao shancai let go to the people around him: “ha ha, the Taiwanese (referring to Jiang Shangyi) are really deceiving. This is a situation. Let him be the successor.”
A Hongxin insider told 36 krypton that Long Wei, the former chairman of Hongxin, confided his truth after a big drink: “my salary is only 10000 or 20000 yuan a month now. When can I get 100 million yuan depending on my salary? But after this project (Hongxin), I can retire. ”
Cao Shan continued to move around, copying the “chip bureau” in a similar way. 36 krypton learned that Cao Shan had many chip projects in his hands. Since November 2018, Caoshan has successively established Zhuhai Yixin, Yunxin international, Hubei Tianxin, Jinan Quanxin Even after Hongxin’s explosion, Cao Shan still made the “Quanxin” project a success in Jinan. He used the same routine as Hongxin to leverage the local capital of Jinan to build a factory.
There are a number of chip companies behind Caoshan, and 36 krypton has sorted them out according to public information
Before publishing, 36 krypton made 11 calls to Cao Shan, all of which were in the status of refusing to receive and hanging up. Cao Shan only sent a short message of “please send a message”. After 36 krypton sent to verify the information, Cao Shan lost the news.
Helplessness and plot of local core making upsurge
What kind of soil is the Hongxin scam in?
An industrial investor stationed in the Yangtze River Delta for a long time told krypton 36 that the evidence of “fraud” in local core making projects is often hard to be established. The process of chip manufacturing is complex, and a project is yellow. It’s hard to say whether it is because the investor’s funds are not in place, the local government intervenes too much, or there are problems with technology and equipment. Moreover, the explosion of chip projects, which belong to the “family clowns” of local governments, are mostly unwilling to continue to investigate and can only suffer dumb losses.
As a direct result, the cost of cheating in the semiconductor industry is lower than people think, and half way abortive projects are also frequent
In May 2020, Chengdu Gexin, a large chip manufacturing plant with a planned investment of 10 billion US dollars, officially declared its complete shutdown. This project only lasted for 2 years;
In July 2020, Nanjing Decoma, a chip project with an investment of US $3 billion, became a “three debt company” with arrears of wages, debts and taxes. Now it has entered the bankruptcy liquidation process;
In 2017, Huai’an district government of Huai’an City took out 2.6 billion yuan to buy 60% equity of Dehuai semiconductor, which is equivalent to one year’s local general public budget revenue. Now, only a company with hundreds of millions of yuan of debt is left.
Since 2015, 36 krypton, a major domestic chip project, has been sorted out based on public information
Of course, not every chip project, like Hongxin, is a “Bureau maker” who wilfully swindles, but there are still many projects with broken funds and half abortions.
In 2020, there is a strange phenomenon in the chip manufacturing industry: local core manufacturing projects are booming while entering the market quickly. According to CB insights, a market research institution, in the first half of 2020 alone, semiconductor projects have been implemented in 15 provinces and more than 29 cities, an increase of 84% compared with last year. Jiangsu Province, Anhui Province, Zhejiang Province and Shandong Province are ranked in the top four according to the amount of contracts signed. Shanghai, which has always attached great importance to semiconductor project investment, can only be ranked fifth.
Behind this, on the one hand, ZTE, Huawei and other companies frequently appeal to pay attention to chip manufacturing because of their high-end chip “sticking neck”; on the other hand, local governments and social capital excessively pursue semiconductors, and even many real estate, cement companies and other laymen have made semiconductor ideas, so speculators have an opportunity to take advantage of them.
Meng Wei, spokesman of the national development and Reform Commission, pointed out China’s “core” disease in October last year: the enthusiasm of domestic investment in the integrated circuit industry is high, and the “three no enterprises” without experience, technology and talents enter the industry. Some places do not have a clear understanding of the laws of integrated circuits, blindly embark on projects, and the risk of low-level repeated construction appears.
After all, the chip is a technology intensive and capital intensive project. If you really want to make it, you can’t do without one condition: that is, you need the government or other investors to have deep pockets and big determination – the first phase of the Ziguang “Changjiang storage” chip project next to Hongxin has invested hundreds of billions of yuan, and the cost of the chip project often takes five to eight years to determine; it also needs accurate positioning and talents in place.
Song Chunyu, vice president of Lenovo Group and partner of Lenovo venture capital, believes that the first step to avoid stepping on the pit is to see whether the founder is a veteran of the industry and whether the proposed goal respects the objective laws of the industry. In his view, it will take 20-30 years for an integrated circuit to be made, from materials to equipment to manufacturing process. It needs key leaders, repeated verification with customers, and long-term running in process with equipment.
“There is no shortcut, no short time for semiconductors.” Song Chunyu said to 36 krypton.
But what needs to be clear is that the chip project has a bubble, which does not mean that the general direction of making chips is wrong. The development process of photovoltaic and new energy vehicles may be worth learning from the current chip industry: in the era of policy subsidies in these two industries, the industry has been stimulated to expand rapidly, but at the same time, it has also become a disaster area for fraud compensation. However, with the introduction of standardized intensive production, the bubble has gradually been removed. At present, domestic enterprises are in a leading position in the global photovoltaic industry from materials to equipment, and the volume of new energy vehicles has also occupied the first place in the world.
In addition to cheaters, there are many people who want to make a career in the field of chip.
Jiang Shangyi, 74, has good contacts in the industry and is extremely fond of feathers. His early holdings of TSMC shares have made him not forced to make a living. According to common sense, “Jiang’s father” should not easily fall into the trap of Hongxin.
A person who had a lot of contact with Jiang Shangyi told 36 krypton, “Jiang’s father needs a stage too much.”
Talking about why Jiang Shangyi joined Hongxin in a hurry, the above-mentioned people talked about three reasons: first, Jiang Shangyi worked in TSMC for half of his life, and people who worked in technology were more like “scholars”, with deep industry experience but insufficient social experience; second, 2016 When Jiang Shangyi went from TSMC to SMIC international to perform his duties in, he angered Zhang Zhongmou, the leader of TSMC. In order to calm his anger, Jiang Shangyi agreed to work as a consultant in SMIC international, but in fact he had no right. This situation made Jiang’s father “useless”.
What’s more, after the domestic semiconductor suffered a power outage, who can break through the technological blockade first means that it will remain famous in history. “He (Jiang Shangyi) wants to keep a name in his life.” The person said. As of press release, 36 krypton could not contact Jiang Shangyi.
After quitting Hongxin, Jiang Shangyi regained his confidence and joined SMIC. Although his salary is only 1 / 5 of that of TSMC, what attracts him more is to complete the advanced manufacturing process.
Looking back on the past, there have been three core making tides in China: the first time in the period of reform and opening up, 33 domestic units invested 1.3 billion yuan to introduce various kinds of IC production lines, but because of lack of experience, few of them were put into use; the second time was after the “909 project” in the 1990s, and the third time was since the establishment of the national fund in 2014.
The three core making waves are not fruitless. After the first core making tide, in 1988, China’s integrated circuit output reached 100 million pieces for the first time, which means that the country has entered the stage of industrialized production; in the second core making tide, representative companies such as SMIC international and Loongson have emerged; in the third time, in 2020, the integrated circuit output has soared to 261.3 billion.
Xie Zhifeng, one of the founders of SMIC, once mentioned that the development of semiconductors in the United States, Japan and South Korea has reached its peak, the market is in China, talents are returning, and domestic semiconductors have reached the stage of favorable time, location and people.
“If we don’t grasp the opportunity at this stage, we will fall behind again in the next cycle.”.
(at the request of the interviewees, Tao Yong and Lin Xiong are pseudonyms. 36 krypton author Li Qin and intern Geng Wujing also contributed to this article.)