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China readying $143b package for chip firms
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hina is working on a support package of more than 1 trillion yuan (US$143 billion) for its semiconductor industry, three sources have said, in a major step towards self-sufficiency in chips and to counter the United States’ moves aimed at slowing its technological advances.
Beijing planned to roll out what would 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, the sources told Reuters.
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 the 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 percent subsidy on the cost of purchases, the three sources said.
The fiscal support plan comes after the US Commerce Department passed in October a sweeping set of regulations, which could bar research labs and commercial data centers’ access to advanced artificial intelligence (AI) chips, among other curbs.
And US President Joe Biden in August signed a landmark bill to provide $52.7 billion in grants for US semiconductor production and research, as well as tax credit for chip plants estimated to be worth $24 billion.
With its incentive package, Beijing aimed to step up support for Chinese chips firms to build, expand or modernize domestic facilities for fabrication, assembly, packaging and research and development, the sources said.
Beijing’s latest plan also included preferential tax policies for the country’s semiconductor industry, they added.
China’s State Council Information Office did not immediately respond to a request for comment.
Likely beneficiaries
The beneficiaries would 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 broke. Semiconductor Manufacturing International Corp. (SMIC) added more than 4 percent, sending its daily gain to roughly 6 percent. Hua Hong Semiconductor Ltd. had surged more than 12 percent so far, while mainland markets were closed at the time.
Achieving self-reliance in technology featured prominently in Chinese 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.
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 US pressures, analysts have said.
WTO dispute
Meanwhile, China has filed a dispute with the World Trade Organization (WTO) over US restrictions on chip exports, Beijing’s commerce ministry said in a statement late on Monday, accusing Washington of threatening global supply chains, AFP reported.
The US announced in October new export controls aimed at restricting China’s ability to buy and manufacture high-end chips with military applications, complicating Beijing’s push to further its own semiconductor industry and develop advanced military systems.
The moves include export restrictions on some chips used in supercomputing as well as stricter requirements on the sale of semiconductor equipment.
The aim was to prevent “sensitive technologies with military applications” from being acquired by China’s military, intelligence and security services, the US Commerce Department said in October.
However, China’s foreign ministry claimed on Tuesday that the US had “repeatedly used national security as an excuse to interfere in the normal operation of international trade”.
“All countries should stand up and not let Washington’s unilateralism and protectionism go unchecked,” foreign ministry spokesman Wang Wenbin said at a routine briefing.
“This concerns the stability of the global trade system and more importantly, international justice.”
China’s commerce ministry on Monday accused the US of “obstructing normal international trade in products including chips and threatening the stability of the global industrial supply chain”, as well as violating international trade rules and engaging in “protectionist practices”.
The WTO dispute was intended to defend China’s “legitimate rights and interests”, the ministry said in its statement, urging Washington to “give up zero-sum thinking”.
Days before the latest chip controls, the Pentagon added 13 more Chinese firms, including drone manufacturer DJI and surveillance firm Zhejiang Dahua Technology, to a blacklist of military-linked entities.
