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China readying $143bn package for chip firms in face of US curbs (Arms Race Update)

Daniel Nenni

Admin
Staff member
Beijing to roll out subsidies and tax credits to bolster semiconductor production and research, sources say.

China Chip Embargo.jpg


China is working on a more than 1 trillion yuan ($144bn) support package for its semiconductor industry, according to three sources, in a significant step towards self-sufficiency in chips aimed at countering the United States’ moves to slow its technological advances. Beijing plans to roll out what will be one of its biggest fiscal incentive packages, allocated over five years, mainly as subsidies and tax credits to bolster semiconductor production and research activities at home, the sources said.

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

It will also likely further raise concerns in the US and its allied countries about China’s competition in the semiconductor industry, analysts said. Some US lawmakers are already worried about China’s chip production capacity build-up.

The plan could be implemented as soon as the first quarter of next year, said two of the sources who declined to be named as they were not authorised to speak to 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 percent subsidy on the cost of purchases, the three sources said. The fiscal support plan comes after the US Commerce Department in October passed a sweeping set of regulations, which could bar research labs and commercial data centres’ access to advanced AI chips, among other curbs. The US has also been lobbying some of its partners, including Japan and the Netherlands, to tighten exports to China of equipment used to make semiconductors.

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

With the incentive package, Beijing aims to step up support for Chinese chip 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 added.
China’s State Council Information Office did not respond to a request for comment.

Markets’ reaction​

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 said.

Stocks of Chinese chipmakers jumped in early trading on Wednesday after news of the package. China’s SSE STAR Chip Index opened nearly 4 percent higher. Shanghai-listed shares of industry giant Semiconductor Manufacturing International Corp (SMIC) rose as much as 5.2 percent to a four-month high.

Some Chinese chip shares in Hong Kong also rose sharply on Tuesday following the Reuters report. SMIC added more than 8 percent, sending its daily gain to nearly 10 percent. Hua Hong Semiconductor Ltd closed up 17 percent. Mainland markets were closed when the report was published.

Achieving self-reliance in technology featured prominently in President Xi Jinping’s full work report at China’s Communist Party Congress in October. The term “technology” was referred to 40 times, up from 17 times in the report from the 2017 congress.

Xi’s call for China to “win the battle” in core technologies could signal an overhaul in Beijing’s approach to advancing its tech industry, with more state-led spending and intervention to counter US pressures, analysts have said.

The US sanctions published in October have caused big overseas-based chip manufacturing equipment companies to cease supplying key Chinese chipmakers, including Yangtze memory Technologies Co (YMTC) and SMIC, and makers of advanced artificial intelligence chips to cease supplying companies and laboratories.

The world’s second-largest economy has launched a trade dispute at the World Trade Organization[/URL] against the US over its chip export control measures, China’s commerce ministry said on Monday.

China has long lagged behind the rest of the world in the chip manufacturing equipment sector, which remains dominated by companies based in Japan, the Netherlands and the US.

A number of domestic firms have emerged in the past 20 years but most remain behind their rivals in terms of ability to produce advanced chips. NAURA’s etching and thermal process equipment, for example, can only produce 28-nanometre and above chips – relatively mature technologies. Shanghai Micro Electronics Equipment Group Co Ltd (SMEE), China’s only lithography company, can produce 90-nanometre chips, well behind that of the Netherlands’ ASML, which is producing those as thin as 3 nanometers.

 
Oh boy here comes the fraud gravy train for round 2. Didn’t a bunch of Chinese foundry and chip designers already get busted on embezzlement and bankrupted? I.E Wuhan Hongxin, Tsinghua Unigroup and others. What could possibly go wrong this time…
 
Oh boy here comes the fraud gravy train for round 2. Didn’t a bunch of Chinese foundry and chip designers already get busted on embezzlement and bankrupted? I.E Wuhan Hongxin, Tsinghua Unigroup and others. What could possibly go wrong this time…

Not that China has a choice. I don't think the WTO is going to be all that helpful either:


I'm hoping that this will spur more US investment but I really think semiconductor people will be the critical path so I hope we spend some time and money on academia. The numbers I have seen for paper submissions etc... highly favor China. More than half of the papers submitted to IEDM this year were from China. The last CES I attended a few years back floorspace was dominated by Chinese companies. We will see how CES goes next month but I really think the US is facing a critical semiconductor people shortage.
 
I don't think the WTO is going to be all that helpful either:

True,WTO already ruled that US 25% tariff on China is illegal,but the US just ignored it. I think China is just trying to get moral high ground on this issue,since the US advocate "rule based order" all the time. Also give pressure to Europeans not to join US action,since Europeans respect WTO much more than Americans.
 
True,WTO already ruled that US 25% tariff on China is illegal,but the US just ignored it. I think China is just trying to get moral high ground on this issue,since the US advocate "rule based order" all the time. Also give pressure to Europeans not to join US action,since Europeans respect WTO much more than Americans.
Europeans and Japanese would be absolute fools to continue to export high tech to China. China is trying to upend the very rules based order that enabled that enables these tools to be built with parts and IP fork multiple countries and then sold worldwide. It’s well last time for Europe to get it through its head that China does not have the same set of values as us. They are seeking to turn the world on its head by any means necessary. The fact you think that China of all places would have a decent case at the WTO is laughable. This is the same country that strong arms all who want to do business on this shores in inequitable partnerships and rampantly steals and appropriates IP.
 
The fact you think that China of all places would have a decent case at the WTO is laughable.

Well,China did win the tariff case against the US at WTO. But I do not expect the US would honor WTO ruling

Chinese battery makers pay royalty to US lithium battery inventor every year until the patent expired,so why did they do that if they don't respect foreign IP?

Europeans and Japanese would be absolute fools to continue to export high tech to China

Dutch chip equipment maker ASML's CEO questions U.S. export rules on China​

 
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Europeans and Japanese would be absolute fools to continue to export high tech to China. China is trying to upend the very rules based order that enabled that enables these tools to be built with parts and IP fork multiple countries and then sold worldwide. It’s well last time for Europe to get it through its head that China does not have the same set of values as us. They are seeking to turn the world on its head by any means necessary. The fact you think that China of all places would have a decent case at the WTO is laughable. This is the same country that strong arms all who want to do business on this shores in inequitable partnerships and rampantly steals and appropriates IP.
This is pretty odd wording considering WTO cases are publicly available online for anyone to read...
Some of the arguments in them are credible, some are iffier, but nonetheless I agree with tonyget that flat out ignoring WTO decisions (and blocking the WTO Appeals court from working) certainly does not win any friends in Brussels or Tokyo.
 
This is pretty odd wording considering WTO cases are publicly available online for anyone to read...
Some of the arguments in them are credible, some are iffier, but nonetheless I agree with tonyget that flat out ignoring WTO decisions (and blocking the WTO Appeals court from working) certainly does not win any friends in Brussels or Tokyo.
ASML uses American IP for the core technology that goes into EUV, they are a system integrator of others IP at heart. Look up the patents from EUV and more specifically the laser source . This research started at the department of energy and was continued at Cymer. The U.S is well within its rights to block the export of that technology. With other less sophisticated tools that come from Japan, let’s not forget that it’s not like Japan and China are best friends either. Japan is squarely in the U.S camp and it’s new government is even buying a boatload of tomahawk missiles soon. I very much doubt Nikon, Tokyo Electron and others won’t get on board.
 
ASML uses American IP for the core technology that goes into EUV, they are a system integrator of others IP at heart. Look up the patents from EUV and more specifically the laser source . This research started at the department of energy and was continued at Cymer. The U.S is well within its rights to block the export of that technology. With other less sophisticated tools that come from Japan, let’s not forget that it’s not like Japan and China are best friends either. Japan is squarely in the U.S camp and it’s new government is even buying a boatload of tomahawk missiles soon. I very much doubt Nikon, Tokyo Electron and others won’t get on board.

Let's see who needs whom more. ASML can find alternative laser source from suppliers like Trumpf or Gigaphoton,but can the US make own EUV?
 
ASML uses American IP for the core technology that goes into EUV, they are a system integrator of others IP at heart. Look up the patents from EUV and more specifically the laser source . This research started at the department of energy and was continued at Cymer. The U.S is well within its rights to block the export of that technology. With other less sophisticated tools that come from Japan, let’s not forget that it’s not like Japan and China are best friends either. Japan is squarely in the U.S camp and it’s new government is even buying a boatload of tomahawk missiles soon. I very much doubt Nikon, Tokyo Electron and others won’t get on board.
US might be well within its rights to block something. And other countries are within their rights to avoid doing business with US since it loves to tell others what to do (and not to do). Keep in mind that Chinese export and import exceed that of US. Another notable example of how the two economies compare: Chinese car market is equal (or bigger) than the combined market of US and EU.
 
Let's see who needs whom more. ASML can find alternative laser source from suppliers like Trumpf or Gigaphoton,but can the US make own EUV?
Look up in Google of EUV history. US gov labs and companies invested billions in early research of this technology. Give credits to ASML, they stepped forward when US was looking for a partner to commercialize. US owns some of the most critical IP in this technology and Netherlands is an ally. Don't mistaken ASML is trying to be on China's side. No one in the free world is.
 
Look up in Google of EUV history. US gov labs and companies invested billions in early research of this technology. Give credits to ASML, they stepped forward when US was looking for a partner to commercialize. US owns some of the most critical IP in this technology and Netherlands is an ally. Don't mistaken ASML is trying to be on China's side. No one in the free world is.
When do these patents expire?
 
Everyone is throwing big numbers around. Samsung is saying the Taylor site could host $200B of fabs. TSMC has gone from $10B to $40B in Phoenix. China is a big country and has one of the biggest numbers at $143B.

So how real are any of these numbers? TSMCs is real, I would say, check in the bank real. Samsung could conceivably do $200B in Texas but it’s unlikely.

With China it’s interesting. Does China want to decouple from US semiconductors, and is this check the down payment on this? Probably that’s the goal, and probably they are all in. When China is all in on something, that’s serious. But I’m thinking with the collapse of zero-COVID, even China can’t stay all-in forever.
 
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