China Semiconductor Megamerger Plans Stall Amid Valuation, Control Disputes

China's ambitious plan to consolidate its fragmented semiconductor equipment industry into a state-backed powerhouse is facing significant challenges, with merger talks led by the National Development and Reform Commission stalling due to disputes over company valuations and ownership structures. Sellers, including private investors and local authorities, are unwilling to lower prices, while buyers refuse to pay premiums, causing negotiations to lose momentum and making a full-scale merger increasingly unlikely. Despite these obstacles, the country has seen an uptick in semiconductor-related acquisitions in 2025, including a notable $16 billion merger between CPU designer Hygon and supercomputer builder Sugon. Industry analysts suggest that consolidation could reduce China's reliance on U.S. semiconductor firms like Applied Materials and Lam Research by enabling more compatible domestic equipment and fostering a self-sufficient ecosystem. However, there is skepticism about whether the current efforts will meet Beijing’s expectations for creating globally competitive players, as authorities seek to focus resources on fewer firms for greater profitability and avoid funding unproductive projects. Overall, while smaller deals continue, the grand vision of a unified Chinese semiconductor supergroup remains elusive amid fragmented interests and valuation disputes.