Chinese semiconductor start-up Xiangdixian Computing Technology has reportedly collapsed amid a cash crunch and dismissed all employees, highlighting difficulties faced by domestic chip firms despite a nationwide self-sufficiency push.

Xiangdixian, based in the southwestern city of Chongqing, on Friday held an all-staff meeting where it announced the dissolution of the company, terminating the contracts of nearly 400 employees, according to reports from local media such as ijiwei and TMTPost.

The company had failed to fulfil terms agreed upon in a previous funding round, following which its shareholders filed a lawsuit that led to the freezing of its bank account, TMTPost reported. Xiangdixian is now seeking new investors and trying to get access to its account, the outlet said.

But in a statement posted on WeChat on Sunday evening, Xiangdixian denied reports that it has taken measures to dissolve or liquidate the company. The firm said it faced “market adjustment pressures”, as the development of domestic GPUs has not met its expectations.

At present, the company said it is “making adjustments” to reduce operating costs affecting some team members, but will strengthen its core research and development and operation teams. The firm added that it is now actively talking to investors and looking for external financing opportunities.