China is preparing a support package worth more than 1 trillion yuan ($143 billion) for its semiconductor industry, three sources said, in an important step towards achieving self-sufficiency in chips and to counter the moves US aimed at slowing down its technological progress.
The sources added that Beijing plans to roll out one of the largest financial stimulus packages in five years, which will mainly be in the form of subsidies and tax credits to boost semiconductor manufacturing and research activities at home.
This points to, as analysts had expected, a more direct approach by China to shape the future of an industry that has become a hot geopolitical issue due to surging demand for chips, which Beijing sees as a cornerstone of its technological power.
Analysts say it is likely to raise even greater concerns in the United States and its allies about Chinese competition in the semiconductor industry. Some US lawmakers are already concerned about China’s increased chip-making capacity.
Two sources, who declined to be identified because they were not authorized to speak to the media, said the plan could be implemented in the first quarter of the new year.
The two sources added that most of the financial aid will be used to support Chinese companies’ purchases of domestic semiconductor equipment.
The three sources said those companies would receive a 20 percent subsidy on the cost of the purchases.
The financial backing plan comes after the US Department of Commerce in October passed a sweeping set of regulations that could prevent research labs and commercial data centers from accessing advanced artificial intelligence chips, among other restrictions.
The United States is also lobbying some of its partners, including Japan and the Netherlands, to tighten restrictions on exports of equipment used in the semiconductor industry to China.
US President Joe Biden in August signed a landmark bill to provide $52.7 billion in grants for US semiconductor manufacturing and research, as well as about $24 billion in tax credits for chip factories.
Through the stimulus package, the sources said, Beijing aims to step up support for Chinese chip companies to build, expand or upgrade domestic manufacturing, assembly, packaging and R&D facilities.
They added that Beijing’s latest plans also include preferential tax policies for the country’s semiconductor industry.
China’s State Council information office did not immediately respond to a request for comment.
($1 = 6.9796 CNY)
