An employee showcases a semiconductor integrated circuit at an industry expo on October 31. Photo: VCG

Chinese controversial semiconductor maker Wuhan Hongxin Semiconductor Manufacturing Co (HSMC) has reportedly issued a noticed to dismiss all staff members, which industry analysts said may be a sign of the total failure of the problematic project but will be unlikely to affect future investment into the country's semiconductor sector.

"Given the company's status quo, there is no plan for business resumption. All staff members have to submit resignation letters before Sunday and complete departure clearance before March 5. Those who are on a vacation can finish the process online," industry website ijiwei.com reported, citing sources familiar with the matter.

The report said that HSMC currently has at least 240 employees, but whether these employees will have severance pay remains unknown.

The official website of HSMC could not be logged into on Sunday.

"The fallout of HSMC is within expectations as problems about the project have been exposed two years ago, which, however, doesn't reflect the situation of the country's semiconductor industry as a whole," Ma Jihua, a veteran industry analyst, told the Global Times on Sunday.

HSMC, founded in November 2017, planned to make wafers with advanced logic technology in sizes of 7 nanometers and 14 nanometers. Each of the production lines was expected to make 30,000 pieces per month. The plan also called for a wafer-level advanced packaging production line.

However, the projects grounded to a halt in mid-2020 due to a lack of funds. In November 2020, it was had reportedly been fully taken over by the local unit of the State-owned Assets Supervision and Administration Commission of the State Council in Dongxihu district in Wuhan, Central China's Hubei Province.

Fu Liang, a Beijing-based telecom industry expert, said that the failure of the scale project is in part due to a hasty launch without a systemic and thorough planning, as well as deepen pre-investment investigations.

It's worth noting that the company has pledged an advanced lithography machine which it had bought from Dutch company ASML as mortgage to a bank for loans worth 580 million yuan ($89.61 million) at the end of 2019.

"Though not the most cutting-edge technology, the machine is advanced," Fu said, noting that even if it enters services, foreign talent is needed to conduct long-term maintenance of the machine.

Ma said that the failure of HSMC, if not a hoax itself, will have no impact on the heating investments in the semiconductor sector, as failures are normal in the process of tens of thousands of start-ups striving for innovation to make breakthroughs in stranglehold areas.

"There may be more failures in the sector in the future, as there are too many start-ups established two or three years ago, but any loss is unavoidable and we should take a long-term view," Ma said.