China plans over $143 bn push to boost domestic chips, compete with US

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 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.

The plan, which according to the sources could be implemented as soon as the first quarter of next year, has not been reported before.

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

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

China has a stated policy priority to develop an independent chip industry.

The fiscal support plan comes after 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 chips firms to build, expand or modernise 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.

The sources declined to be named as they were not authorised to speak to media.

The State Council Information Office did not immediately respond to a request for comment.

US in talks with Japan, Netherlands on curbs

The US-China row over technology has ratcheted up this week, with Washington confirming talks with Japan and the Netherlands about tightening exports of semiconductor manufacturing equipment to China, and Beijing hitting back.

China on Monday launched a trade dispute at the World Trade Organization opposing U.S. chip export control measures, while Reuters reported on Tuesday that it is preparing a more than 1 trillion yuan ($143 billion) package to support its domestic chip-making industry.

The Biden administration aims to cut China off from advanced semiconductor chips made anywhere in the world with U.S.

equipment in a bid to slow Beijing’s technological and military advances, and it issued a series of curbs in October. Jake Sullivan, the White House national security adviser, on Monday said discussions have taken place with Japan and the Netherlands on adopting similar measures.

“I’m not going to get ahead of any announcements,” he told reporters. “I will just say that we are very pleased with the candor, the substance and the intensity of the discussions.”

Sullivan’s comments followed a report by Bloomberg News that Japan and the Netherlands have agreed in principle to join the U.S.-led technology export control, citing people familiar with the matter. Reuters

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