China to Pump $143 Billion Into Domestic Semiconductor Companies to Counter US Restrictions - Report

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China will unleash a war chest of around $143 billion (roughly about 1 trillion yuan) to boost its semiconductor industry, which has been been bearing the brunt of hostile actions from the US government.

Beijing's planned fiscal incentive package for the chip industry will be rolled out over the next five years, Reuters reported, citing sources. The package involves subsidies and tax credits aimed at increasing semiconductor production and development. The package is aimed at stopping Washington from crippling China's technological advancement and stymie its supercomputing prowess by curtailing the all too important chip industry.

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Export Controls

In October this year, the Biden administration tightened the screws on the Chinese chipmakers by enforcing more export controls targeting them. The move sought to stop not just American companies from selling key equipment and technology to China but persuade foreign firms to do so.

The measures unveiled by President Joe Biden were aimed at closing China out of manufacturing some key semiconductor chips. The new rules further restricted toolmakers like KLA Corp, Lam Research Corp and Applied Materials Inc from shipping any equipment Chinese-owned factories that make advanced logic chips.

Image courtesy of Neil Sapra

In September, the US Commerce Department had slapped new restrictions on chip sales to Chinese companies. As per the department's guidance, US chipmakers must immediately procure a license to supply artificial intelligence chips to Chinese companies. The US says stringent measures are needed to ensure that AI chips are not used by the Chinese for 'military end use'.

In another landmark move in July, the US Senate voted to move forward with the CHIPS Act that will provide a $54 billion boost to the country's semiconductor industry. The long-delayed Senate vote fulfilled the chip industry's demand for subsidies that will enable it to compete with China.

Shoring Up Chipmakers

With the multi-billion package for the semiconductor industry, Beijing is hoping to shore up the chip makers and researchers. Under the package, Chinese companies will be enabled in building, expanding and modernising facilities for fabrication, assembly, packaging, and research and development, Reuters reported.

Chinese companies like NAURA Technology Group, Advanced Micro-Fabrication Equipment Inc China and Kingsemi will directly benefited from the package, the report adds.

Following the news, shares of Semiconductor Manufacturing International Corp (SMIC) rose more than 8 percent, while Hua Hong Semiconductor Ltd zoomed 17 percent.

This article was first published on December 13, 2022