Three sources claimed that China is putting up a $143 billion support plan for its semiconductor industry as part of a major effort to become self-sufficient in chips and to fend off American efforts to stall its technical advancements.
The sources unveiled that Beijing intends to implement one of its largest fiscal incentive schemes over the course of five years, mostly in the form of subsidies and tax credits to support domestic semiconductor manufacture and research efforts.
It denotes, as many had predicted, a more assertive stance by China in determining the course of an industry that has evolved into a geopolitical flashpoint as a result of increasing chip demand and that Beijing sees as a pillar of its technological strength.
Two people who asked not to be identified because they were not permitted to speak to the media, revealed that the proposal may be implemented as early as the first quarter of next year.
They also added a majority of the financial aid would be used to finance Chinese companies’ acquisitions of domestic semiconductor equipment, mostly for semiconductor production factories, or fabs.
Seemingly, such businesses would be eligible for a 20% discount on the cost of acquisitions.
The financial support plan follows the U.S. Commerce Department’s adoption in October of a comprehensive set of regulations that, among other restrictions, may prevent research laboratories and commercial data centres from accessing cutting-edge AI processors.
Additionally, the United States has lobbied several of its allies, such as Japan and the Netherlands, to restrict semiconductor manufacturing equipment shipments to China.
Atop of that, in August, U.S. President Joe Biden signed a historic law granting $52.7 billion in subsidies for American semiconductor manufacture and research as well as a $24 billion tax credit for chip factories.
Beijing wants to increase funding for Chinese chip companies building, expanding, or modernising domestic facilities for fabricating, assembling, shipping, and development and research based on the sources.
Beijing’s most recent plan also includes favourable tax regulations for the nation’s semiconductor industry.
Requests for a reply from China’s State Council Information Office were not complied with.
State-owned as well as private businesses in the sector will profit from this, especially sizable semiconductor equipment companies like NAURA Technology Group (002371.SZ), Kingsemi (688037.SS), and Advanced Micro-Fabrication Equipment Inc China (688012.SS), as per the sources.
Following the package’s announcement, certain Chinese chip stocks in Hong Kong quickly increased. Adding more than 8%, Semiconductor Manufacturing International Corp (SMIC) (0981.HK) increased its day gain to almost 10%. Even though the mainland markets remained shut when the report was released, Hua Hong Semiconductor Ltd (1347.HK) ended the day up 17%.
In his comprehensive work report presented to the Communist Party Congress in October, President Xi Jinping emphasised the importance of achieving technological self-reliance. There were 40 references to the word “technology,” up from 17 in the statement from the 2017 Congress.
Commentators believed Xi’s call for China to achieve victory in core technologies might herald a change in Beijing’s strategy for growing its tech sector, with greater state-led funding and intervention to fend against American pressure.
Due to the U.S. sanctions announced in October, foremost foreign-based chip engineering equipment companies have stilled supplying imperative Chinese chipmakers like the well-sought Yangtze Memory Technologies Co (YMTC) and SMIC.
In addition, manufacturers of cutting-edge artificial intelligence chips have stopped supplying businesses and research facilities.
China’s commerce ministry announced on Monday that the world’s second-largest economy has filed a trade complaint with the World Trade Organization versus the United States over its chip exports control policies.
China has long lagged behind the other powerhouses across the globe in the chips fabrication and equipment market, which is still dominated largely by Japanese, American, and Dutch enterprises.
In the past 20 years, several domestic companies have developed, but the majority still lag behind their competitors in terms of their capacity to produce cutting-edge chips.