Minister among those under probe as China's chip race with US heats up

BEIJING • China has begun a series of investigations into key figures responsible for shaping chip policy and investment, raising questions about the impact on Beijing's blueprint for challenging United States dominance of a US$550 billion (S$759 billion) industry.

The top anti-graft agency this week launched an investigation into the minister who spearheads the country's plan to build a world-class chip industry and wean itself off American silicon.

Minister of Industry and Information Technology Xiao Yaqing, whose agency oversees giants from Huawei Technologies to Xiaomi, became the most senior sitting Cabinet member to face a disciplinary probe in almost four years.

The same day, Caixin reported that Mr Ding Wenwu, head of a high-profile state-backed fund that invested tens of billions of dollars in the semiconductor industry, was unreachable after he became the target of a probe.

Beijing has not linked the two cases or specified allegations beyond legal and disciplinary violations. But they come on the heels of several cases since late last year that have unnerved an industry accorded priority status by Chinese President Xi Jinping and long accustomed to government funding and support.

Just days before Mr Xiao's probe was announced, Caixin reported that an investigation had also started against Mr Zhao Weiguo, who had served as the chairman of Tsinghua Unigroup before the company - once regarded as one of China's national champions in semiconductors - collapsed under a mountain of debt. Mr Zhao had publicly fought a US$9 billion bailout of Tsinghua Unigroup, led by state-backed funds, before he was ousted from the group.

"The Chinese Communist Party is deadly serious about advancing China's capacity and self reliance when it comes to the chip sector. This is vital to the party," said Mr Alex Capri, a research fellow at the Asia-based Hinrich Foundation.

"These important figures take on positions highly instrumental for advancing China's chip industry but it is not 100 per cent clear whether they are completely toeing the party line. At the same time, the party is trying to control more and more of the tech sector."

The Ministry of Industry and Information Technology (MIIT) did not respond to faxed inquiries, while representatives for Mr Ding's fund - the National Integrated Circuit Industry Investment Fund - were not available for comment. Mr Ding and Mr Zhao did not answer phone calls from Bloomberg seeking comment.

MIIT and Mr Ding's fund are instrumental in Beijing's struggle with the US for tech supremacy. They often act in concert to spur development of the semiconductors crucial to everything from phones to cars, and future applications in artificial intelligence and robotics.

The probe into Mr Xiao raises questions about the effectiveness of a campaign that has swallowed billions of dollars in funding, but has yet to produce technologies to truly challenge Silicon Valley.

His plight caught many by surprise. One senior executive at a major electronics maker was still preparing to meet the minister to discuss supply chain issues before the news emerged, according to a second person familiar with the arrangement.

Mr Xiao was the latest of several industry honchos caught up in investigations, with opaque allegations and uncertain outcomes. In November, the authorities announced a probe into Mr Gao Songtao, deputy of an investment firm that managed capital for Mr Ding's fund. Shortly after, the former head of the same firm was named in an official investigation.

BLOOMBERG