Beijing has released Chen Datong, the head of Hua Capital, to seek assistance from chip experts amid challenging Western sanctions, according to a report by The Financial Times.

Hua Capital, a 10 billion yuan investment firm, backed 150 Chinese chip startups and played a leading role in Beijing's drive to boost domestic chip manufacturing.

In August last year, Chen was arrested during investigations into China's chip industry. Officials were frustrated that despite large investments, there had been no significant advances in ending China's dependence on foreign semiconductors.

Last year, the leading anti-corruption authority in the country investigated several organisations linked to the National Integrated Circuit Industry Investment Fund, also called the "Big Fund" — the primary semiconductor investment firm in China that amassed a $47 billion value.

Multiple high-ranking executives and officials from these groups were arrested. Chen's company was among the beneficiaries of the Big Fund, and Chen himself was a self-governing member of its investment council.

A government official in the capital stated that due to the intense US-China technology war, Beijing has decided to release him quickly.

US limits on advanced technology access caused Beijing to reconsider its support for the sector recently.

China's officials aim to prevent the probes from completely derailing the industry. Liu He, the country's economic leader, hinted that entrepreneurs and top talents will be granted enough space and support after surveying semiconductor companies in Beijing.

Chen invested over 80 per cent of Hua Capital's funds in domestic alternatives to foreign technology, as part of China's plan to strengthen its chip industry amid tighter US export controls.

Tech-focused private equity executive, close to 68-year-old Chen, stated that China lacks professional investors to meet the demand for semiconductors despite having government funds ready for investment.

Following his research at the University of Illinois and Stanford, Chen achieved success in California, where he co-established OmniVision Technology in 1995, a camera chipmaker that became listed in New York.

However, Chen later partnered with Chinese state groups to privatise the company after a decade. Chen abandoned his US citizenship in 2014 and pledged to contribute to the development of China's chip industry.

It's uncertain to what extent Chen was affected during his prolonged confinement. Sources gave contrasting accounts, with one mentioning weight loss, while the other stating he was healthy after his release. China's anti-graft agency has the power to detain individuals for an indefinite period before bringing them to trial.

Chen's release is seen as positive news by an employee at Hua Capital, but they do not expect him to return to the office soon. It is premature to discuss his future semiconductor investment plans, according to the source.

The Big Fund probes led to the arrest of executives from Tsinghua Unigroup, a state-backed failed investment group. Zhao Weiguo, the chair, was transferred to prosecutors after a prolonged detention by the National Commission of Supervision.

Chen's detention created anxiety in China's chip industry, particularly for US citizens working there as new US regulations required them to choose between their American passports and working at Chinese chip companies.

A Chinese chip equipment supplier executive suggested that Chen would not have been taken away suddenly if he did not abandon his American citizenship.

Last year, some US citizens working in Chinese semiconductors quit their jobs due to fear of being detained like Chen Datong, causing much concern.

Interestingly, a similar case was reported in South Korea. In 2021, the grandson of Samsung’s founder, Lee Jay-yong, serving a sentence for bribery was paroled by the South Korean authorities.

When asked, the Korean Justice Ministry cited ‘economic factors’ to explain the release of Lee. Media reports, however, indicated that it was more to do with moving Samsung’s semiconductor business towards better decision-making.

Western Sanctions

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