Between January and August, a record number of Chinese computer chip manufacturers went out of business. according to a report by the South China Morning Post examining data from the business database platform Qichacha.

The report indicated that 3.740 “entities that use the Chinese word for ‘chip’ in their registered names, brands or operations” canceled their registrations during the reporting period. That is greater than the 3.420 companies which deregistered in 2021. By contrast in 2020, as the pandemic overtook the nation, only 1,397 chip-making companies closed up shop.

The deregistrations occurred despite China heavily investing in the sector in an attempt to become self-sufficient, as relations soured with the United States, tensions over Taiwan grew, and the US took actions to limit Chinese access to the most sophisticated chip-making equipment.

It is estimated that in 2020 and 2021, China saw roughly 70,000 chip-making companies spring up in the sector.

According to the report, new companies are beginning to struggle due to harsh conditions within the sector being produced by high competition and lagging demand. Weak consumer demand, following the rush of purchases of tech devices while everyone was locked at home during the pandemic, as well as lingering Covid-lockdowns, and a sagging Chinese economy are all weighing down the sector.

In addition, the US has begun to act more aggressively to rein in the Chinese chip-making industry’s development. Earlier this month, the US restricted the shipment of a number of sophisticated computer chips to both China and Russia, claiming they could have military purposes. Before that the US had put pressure on European manufacturers of chip-making equipment, pressuring them to not supply Chinese chip makers with more advanced models of chip-making lithography equipment.

China’s Foreign Ministry has called the US measures a technological blockade, designed to prevent the nation’s technological development.