An ambitious semiconductor project in eastern China’s Nanjing with planned investment of about $2.8 billion is stalled amid failures to attract investors, spotlighting a bursting bubble of local government forays into computer chips.

The project, led by Tacoma (Nanjing) Semiconductor Technology Co. Ltd., was launched in the capital city of Jiangsu Province in 2016 and designated a major local investment project. The plan included creation of a complex covering the entire business chain of chip production.

According to public information, the Tacoma project planned initial investment of $800 million to build production capacity of 40,000 chips a month. A second stage of investment could involve $2 billion.

But construction of the massive project has been halted since late March because of a capital crunch, according to Li Rui, chairman of Tacoma Nanjing. The Nanjing city government has invested 400 million yuan in the project, but the lack of other investors has made the project unable to continue, according to Li.

Li said he is still making efforts to seek investment from the private sector.

The troubles of Tacoma Nanjing signal a warning for other local authorities that engaged in an investment spree in chip making over the past few years. The growth of the semiconductor industry requires heavy capital investment, high technology capacity and a long time period, said one industry investor.

Many local governments have rushed into the chip-making industry without careful preparation, leading the projects to fail, said an executive at a state-backed chip company.

Contact reporter Han Wei (weihan@caixin.com)

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