Chinese smartphone and consumer-electronics maker Xingji Meizu Group has decided to shutter its chip design unit, marking another setback to China’s campaign to become self-sufficient in all aspects of the chip industry.

The company, owned by Zhejiang Geely Holding Group Co. Ltd., confirmed on Tuesday that it plans to terminate its chip design business due to uncertainties in the global economy and to focus more on product innovation and software user experience. The company is currently coordinating with its employees on “personnel optimization plans,” a spokesperson said.

After shedding its chip unit, Xingji Meizu is expected to focus on supporting Geely's efforts to bolster the carmaker's software capabilities and its development of smart vehicles, as competitors race to build connected ecosystems.

Visitors try out Meizu smartphones at Mobile World Congress Shanghai 2023 in June.

The development of the domestic semiconductor industry has become more pressing for China as the country faces sweeping restrictions on cutting-edge chips and related technology from the world’s leading semiconductor nations.

The dissolution of its chip operation came just months after Chinese smartphone giant Oppo in May closed down its chip design subsidiary Zeku to the shock of employees, dealing a blow to China's goal of becoming self-reliant in semiconductors amid growing US trade sanctions on the industry.

At the time, Oppo blamed its "difficult decision" on "uncertainties in the global economy and smartphone market". The move affected nearly 3,000 workers, hired by Zeku after it was set up in 2019 to design chips for Oppo's gadgets.

The abrupt closure surprised the industry, as Zeku had been putting out job postings as late as two weeks before the announcement. The advertised vacancies covered dozens of positions, including a chip architecture engineer and several chip verification and software coders.

The demise of Oppo and Meizu's chip units highlights the challenges faced by fabless chip designers in China. Under sanctions that restrict the export of advanced chips containing US-origin technology, it has become increasingly difficult for Chinese fabless companies to find manufacturers to produce their designs.