May 29, 2024


General Evolution

China readying $143 bln package for its chip firms in face of U.S. curbs -sources

Article content

HONG KONG — China is working on a more than 1 trillion yuan ($143 billion) support package for its semiconductor industry, three sources said, in a major step towards self sufficiency in chips and to counter U.S. moves aimed at slowing its technological advances.

Beijing plans to roll out what will be one of its biggest fiscal incentive packages over five years, mainly as subsidies and tax credits to bolster semiconductor production and research activities at home, said the sources.

Advertisement 2

Article content

Article content

It signals, as analysts have expected, a more direct approach by China in shaping the future of an industry, which has become a geopolitical hot button due to soaring demand for chips and which Beijing regards as a cornerstone of its technological might.

The plan could be implemented as soon as the first quarter of next year, said two of the sources who declined to be named as they were not authorized to speak to media.

The majority of the financial assistance would be used to subsidize the purchases of domestic semiconductor equipment by Chinese firms, mainly semiconductor fabrication plants, or fabs, they said.

Such companies would be entitled to a 20% subsidy on the cost of purchases, the three sources said.

The fiscal support plan comes after the U.S. Commerce Department passed in October a sweeping set of regulations, which could bar research labs and commercial data centers’ access to advanced AI chips, among other curbs.

Advertisement 3

Article content

The United States has also been lobbying some of its partners, including Japan and the Netherlands, to tighten exports to China of equipment used to make semiconductors.

And U.S. President Joe Biden in August signed a landmark bill to provide $52.7 billion in grants for U.S. semiconductor production and research as well as tax credit for chip plants estimated to be worth $24 billion.

With the incentive package, Beijing aims to step up support for Chinese chip firms to build, expand or modernize domestic facilities for fabrication, assembly, packaging, and research and development, the sources said.

Beijing’s latest plan also includes preferential tax policies for the country’s semiconductor industry, they said.

Advertisement 4

Article content

China’s State Council Information Office did not immediately respond to a request for comment.


The beneficiaries will be both state-owned and private enterprises in the industry, notably large semiconductor equipment firms like NAURA Technology Group, Advanced Micro-Fabrication Equipment Inc China and Kingsemi, the sources added.

Some Chinese chip shares in Hong Kong rose sharply after news of the package. Semiconductor Manufacturing International Corp (SMIC) added more than 8%, sending its daily gain to nearly 10%. Hua Hong Semiconductor Ltd closed up 17%, while mainland markets were closed when the report was published.

Achieving self-reliance in technology featured prominently in President Xi Jinping’s full work report at the Communist Party Congress in October. The term ‘technology’ was referred to 40 times, up from 17 times in the report from the 2017 congress.

Advertisement 5

Article content

Xi’s call for China to “win the battle” in core technologies could signal an overhaul in Beijing’s approach to advancing its tech industry, with more state-led spending and intervention to counter U.S. pressures, analysts have said.

The U.S. sanctions published in October have caused major overseas-based chip manufacturing equipment companies to cease supplying key Chinese chipmakers, including Yangtze memory Technologies Co (YMTC) and SMIC, and makers of advanced artificial intelligence chips to cease supplying companies and laboratories.

The world’s second-largest economy has launched a trade dispute at the World Trade Organization against the United States over its chip export control measures, China’s commerce ministry said on Monday.

Advertisement 6

Article content

China has long lagged the rest of the world in the chip manufacturing equipment sector, which remains dominated by companies based in the United States, Japan, and the Netherlands.

A number of domestic firms have emerged in the past twenty years, but most remain behind their rivals in terms of ability to produce advanced chips.

NAURA’s etching and thermal process equipment, for example, can only produce 28-nanometer and above chips, relatively mature technologies.

Shanghai Micro Electronics Equipment Group Co. Ltd (SMEE), China’s only lithography company, can produce 90-nanometers chips, well behind that of the Netherlands’ ASML, which is producing those as low as 3 nanometers. ($1 = 6.9796 Chinese yuan renminbi) (Reporting by Julie Zhu in Hong Kong; Additional reporting by Josh Horwitz, Brenda Goh and Jason Xue in Shanghai, Kevin Huang and Xu Jing in Beijing, Editing by Sumeet Chatterjee and Muralikumar Anantharaman)



Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.