BEIJING/SHANGHAI -- China's global acquisitions to fill technology gaps may have ground to a halt, but the country's quest to boost its semiconductor sector continues.

Chinese officials and tech executives agree that foreign regulators are increasingly wary of capital from the world's second largest economy, making it difficult to buy foreign chip providers. "We have to be prepared for more failures when it comes to overseas acquisitions," Sun Yuwang, a long-time industry veteran and president of China Fortune-Tech Capital, told the Semicon China conference in Shanghai on March 15. "The best time for us to buy good chip companies has already passed," he said.

Sun's investment fund is controlled by Semiconductor Manufacturing International Co., China's No. 1 contract chipmaker and smaller rival to Taiwan Semiconductor Manufacturing Co.

China's overseas shopping spree to strengthen its chip sector and slash reliance on products from Intel, Qualcomm, Samsung Electronics, SK Hynix, Toshiba, TSMC and MediaTek has struggled to gain traction. Botched deals, including Beijing-backed Tsinghua Unigroup's failed bids for Micron, Western Digital and three Taiwanese chip assemblers -- Siliconware Precision Industries, Powertech Technology and ChipMOS Technologies -- highlight the country's woes.

The administration of former U.S. President Barack Obama also blocked China's acquisition of German semiconductor equipment supplier Aixtron in December, citing national security risks. Furthermore, a White House report released in January claimed that China's push to build its domestic chip industry could hurt U.S. makers and further heighten defense concerns.

Even Japan's embattled Toshiba is treading lightly as it considers bidders for its profitable manufacturer of NAND flash memory, which is used in electronics such as smartphones. In a move that was widely interpreted to discourage Chinese buyers, the company said it will not sell to certain companies in countries that have political differences with Japan.

As countries view chip technology as critical to their own industries and national security, Sun said that the U.S., Japan, South Korea and Taiwan are unlikely to greenlight acquisitions by Chinese entities. Sun added that any deals actually made will likely be of little value or importance. He suggested that China develop its own industry by sourcing overseas talent rather than relying on foreign acquisitions.

Ding Wenwu, president of the official China Integrated Circuit Industry Investment Fund, shared similar views but did not rule out international partnerships. "We do see limits and obstacles in buying foreign technologies," said Ding. "Under the circumstances, we should never forget the importance of cultivating our own chip sector without relying on other countries' support."

An Peng, director of state-backed Beijing E-Town International Investment and Development, said China should pursue deals in regions and countries that are more receptive to Chinese funds, such as Europe and Israel, and target relatively new companies that are still growing in order to avoid unnecessary scrutiny.

Donald Lu, managing director of Goldman Sachs, said that Chinese bidders should prepare more thoroughly before approaching foreign companies. He cautioned that Chinese investors are now gaining a bad reputation in Silicon Valley.

Still, China continues to urge Taiwan, South Korea and Japan to welcome Chinese investments while downplaying its efforts to compete with U.S. chipmakers. "We hope Taiwan could be more open to Chinese companies," Miao Wei, China's minister of industry and information technology, said on March 11. "This would be beneficial to both sides and also support our goal to facilitate unification and achieve the aim of one China," he said.

The minister added that it is unfair that while many Taiwanese businesses have profited in China, the island does not allow Chinese entities to invest in local companies. Miao made the comments at a press conference on the sideline of the annual meeting of the National People's Congress.

China and Taiwan split amid a civil war in 1949, but Beijing continues to claim the self-ruling, democratic territory as its own and has not renounced the use of force as a possible means to achieve unification. Relations between Taipei and Beijing have cooled significantly since Taiwanese President Tsai Ing-wen of the pro-independence Democratic Progressive Party took office last May.

Despite the rhetoric, the two sides share close economic ties with annual trade totaling about $200 billion.

Wu Ping, head of Summitview Capital and founder of China's top mobile chip designer Spreadtrum Communications, told the Nikkei Asian Review on March 15 that he does not think South Korea, Japan and Taiwan would close their doors to Chinese investment as their domestic markets are not big enough to support their own chip industries.

Chairman Zhou Zixue of SMIC, on the other hand, tried to gloss over any potential rivalry with big chip powers. He argued that Chinese manufacturers are still too small to compete with the top 20 global players so pose no threat to the U.S.

Worldwide resistance notwithstanding, the booming Chinese market has become the most attractive destination for global semiconductor suppliers, while the nation's drive to become self-sufficient continues to gather steam. There will be more new 12-inch chip plants coming online in China than anywhere else, according to Semiconductor Equipment and Materials International, a global industry association that hosts the Semicon China conference. Of the more than 60 advanced, 12-inch chip facilities being planned or constructed globally from now to 2020, 26 will be located in China. Some are domestically owned while others belong to foreign companies.

A number of high-profile projects include three new plants by SMIC, Huali Microelectronics and Taiwan's TSMC along with two memory chip factories by Tsinghua Unigroup. "It's inevitable that China will grow its chip sector as it aims to fulfill the massive market and fit its own needs," said Chu Lung, president of SEMI China.

At the end of 2016, there were around 100 advanced chip facilities across the globe with Chinese owning less than five. "Our Chinese customers' plans are very aggressive," President and Chief Executive Peter Wennink of ASML, the biggest European semiconductor equipment maker, told Nikkei Asian Review on March 14. "The growth rate in China is faster than the rest of the world."

Chinese officials and executives recognize the resistance the country faces in acquiring foreign chip technologies. (Photo by Cheng Ting-fang)

In 2016, China's chip industry grew more than 20%, according to China Semiconductor Industry Association, while research firm Gartner said that globally the industry only grew about 1.5%. However, almost all Chinese local chip experts warned that some frenetic but irrational investment in the sector could lead to oversupply in the future.

"We are not worried about explosive capacity growth in the coming years as there is need and the Chinese market is very big," said Wei Shaojun, professor and director of the Institute of Microelectronics at China's Tsinghua University.

"However, we do have serious concertsns that some companies simply invest to build uncompetitive plants that could later lead to a supply glut," Wei said.

Wei said the nation should consolidate resources, attract more international specialists, and inject more funds into research and development in order to become competitive in the long term.