Qualcomm’s China Venture Shows Risks of Beijing’s Tech Ambition

A joint venture between Qualcomm and the government of a rural Chinese province to make server chips appears to have stalled. And with it, a symbol of China’s push to boost its homegrown industries could instead spotlight the perils of letting bureaucrats pick technology winners.

Chinese government officials showcased Huaxintong Semiconductor, or HXT, as a shining example of how the country was going to leverage foreign expertise to build up its semiconductor industry. On one side of the joint venture there was the local government of Guizhou, a poor, rural province that has lured everyone from Apple to Huawei to build data centers there with the promise of cheap electricity and cool temperatures. On the other was Qualcomm, which had promised to invest in the Chinese economy as part of an antitrust settlement and later needed Beijing’s approval for a huge multinational merger.

But the venture’s grand plans—to build chips for servers in data centers springing up across China—haven’t quite worked out. Amid intensifying competition, demand for HXT’s chips never materialized, according to people familiar with the project. Now, some employees at HXT say they have halted work on future projects.