China plans $143-B push to boost domestic chips, compete with U.S. -sources

HONG KONG  – 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 subsidize 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-percent 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 modernize 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 authorized to speak to media.

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

($1 = 6.9796 Chinese yuan renminbi)