Already facing subversion at the hands of Chinese president Xi Jinping, the China tech sector is all set to confront another menace triggered by the flooding of the Chinese market with counterfeit semiconductor chips (Fake Chips). President Jinping was exceedingly ambitious in his “Star startup project” that aimed at cherishing the semiconductor giants at home to strengthen the crucial supply chain. Instead, the “pioneering” project has not only led to piling up of multiple non-performing assets (NPAs) but also resulted in flooding the tech market with refurbished and fake chips.
Crisis profiteering is a Chinese propensity. When Corona caught the world unaware, it was the Chinese companies that almost immediately jumped right into the business of manufacturing masks and PPE kits, only to be discarded as unfit for use later. Now as the world is crippling under the immense shortage of semiconductor chips fuelled by the US-China trade war and Corona pandemic, the Chinese companies are trying their luck in the profit-rich semiconductor field. However, the hit job has resulted in further deterioration of quality control standards in the country.
China Economic Observer reported a chip agent revealed that to meet the growing demand, suppliers were no longer keeping their counterfeiting practices secret. Instead, they are openly creating separate production lines to expedite the sales of counterfeit or refurbished chips. Two types of fake chips are being circulated in the tech market. One is refurbished chips which include simply recycling used chips directly from the e-waste by removing the logo and cleaning them for re-package. The other type is producing the substandard chips on their own and selling them as an authentic product.
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However, one can’t discern between the original and fake chips at the initial stage. The fake chips come to notice only when the gadgets are exposed to harsh conditions. At which point, it would be the customers or manufacturer of the final products who suffer a loss, while the fake chip providers often avoid troubles.
For worse, the menace is not confined to Chinese boundaries, and Fake Chips could poison the global supply chain in the times to come. The commercial district of Huaqiangbei in Shenzhen, Guangdong, is well known for its counterfeit chip dealers. It has become the largest distribution centre for integrated circuit products in Asia. China, through exporting its electronic products, could easily fill up the global supply chain network with faulty Fake Chips.
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It all started with the Former US President Trump’s crackdown on the USA’s chip export to China that not only starved the Chinese companies of its users but also of its crucial supplies. The Trump administration had banned the sale of semiconductors based on American secretive design and blacklisted the Semiconductor Manufacturing International Corporation (SMIC) – the largest semiconductor manufacturer in Jinping-led China.
The Trump-led crackdown prompted Beijing to look for national alternatives and fund them with hefty budgets. However, Jinping’s idea has backfired gloriously. This has provided the Chinese manufacturers with fortune moment to generate maximum profits out of the tech sector’s simmering woes.