China To Offer Chip Subsidy To Top Domestic Chipmakers

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  • China’s latest policy comes after the US enforced its CHIPS and Science Act last year in August.
  • The US has restricted China’s access to leading technologies in the semiconductor industry.
  • China’s move will allow the selected companies to have more access to government funding for domestic chip equipment.

China is easing the access to its chip subsidy to a few of its top semiconductor manufacturers and providing more control over state-backed research and development.

The Financial Times reported that chipmakers such as Semiconductor Manufacturing International (SMIC), Hua Hong Semiconductor and Huawei, as well as equipment suppliers like Naura and Advanced Micro-Fabrication Equipment Inc China could benefit from the policy.

The ‘chosen ones’ will have access to additional government funding without having to achieve performance goals that were previously necessary. These companies would also play a bigger role in state-backed research projects, reducing the influence of state-owned companies and academic institutes.

China’s latest policy comes after US President Joe Biden signed the US CHIPS and Science Act to provide $52.7 billion in grants for semiconductor production and research, and tax credit for chip plants, estimated to be worth $24 billion.

The Chinese government’s chip subsidy will allow the companies to produce and deploy localised chipmaking tools without any funding cap, and overcome US restrictions. Washington has restricted China’s access to cutting-edge ultraviolet lithography systems at ASML Holdings for its leading chip maker, SMIC. At the same time, California-based Intel and the Taiwan Semiconductor Manufacturing Company (TSMC) have announced new domestic US chip manufacturing facilities.

Meanwhile, China is reportedly working on a support package worth at least $145.34 billion (1 trillion yuan) for its semiconductor industry. The majority of the financial assistance would be used to subsidise the purchases of domestic semiconductor equipment by Chinese firms, mainly semiconductor fabrication plants. The selected companies would be entitled to a 20% subsidy on the cost of purchases, as reported by Reuters in December last year.



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