China to make $143b package ready for semiconductor industry

Asia's top economy China is working on a more than 1.0 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 US moves aimed at slowing its technological advances, reports Reuters.

Beijing plans to roll out what will be 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.

It signals a more direct approach by China in shaping the future of an industry, which has become a geopolitical hot button due to soaring demand for chips and which Beijing regards as a cornerstone of its technological might.

The plan could be implemented as soon as the first quarter of 2023, according to the sources who declined to be named as they were not authorised to speak to the media.

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, they said.

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

The fiscal support plan comes after the US Commerce Department passed in October a sweeping set of regulations, which could bar research labs and commercial data centres' access to advanced AI chips, among other curbs.

The United States has also been lobbying some of its partners to tighten exports to China of equipment used to make semiconductors.

And US President Joe Biden in August signed a landmark bill to provide $52.7 billion in grants for US semiconductor production and research as well as tax credit for chip plants estimated to be worth $24 billion.

With the incentive package, China aims to step up support for local chip firms to build, expand or modernise domestic facilities for fabrication, assembly, packaging, and research and development.

Beijing's latest plan also includes preferential tax policies for the country's semiconductor industry, they said.

The beneficiaries will be both state-owned and private enterprises in the industry, notably large semiconductor equipment firms like NAURA Technology Group, Advanced Micro-Fabrication Equipment Inc China and Kingsemi, the sources added.