China’s Chip Industry Consolidation Talks Hit Snags Amid Valuation Disputes

Beijing's push to consolidate its semiconductor industry faces significant hurdles as negotiations between the government and key chip equipment manufacturers stall. The proposed state-led merger, intended to pool domestic technologies and reduce reliance on US firms, has encountered resistance over ownership structures and valuation disagreements.

Sources reveal DEEP divisions between prospective buyers and sellers, with one insider noting, "There were too many split interests. The prospective sellers don’t want to sell at a loss, and the buyers don’t want to pay a premium." While talks continue under the National Development and Reform Commission's oversight, observers now view a comprehensive consolidation as increasingly unlikely.

Analysts maintain that successful consolidation could help China build a self-sufficient chip ecosystem, reducing dependence on American companies like Applied Materials and Lam Research. The impasse comes as China faces intensified US restrictions on semiconductor access, with 26 industry acquisitions already announced for 2025.