US – China | The Secretive China Semiconductor Industry Strategies

China has unveiled a series of strategies to bolster its domestic semiconductor industry as tensions with the US continue to grow. However, analysts doubt that this will bring significant positive results..

The bulk of the strategy focuses on providing tax incentives. For example, a manufacturer that has been in business for over 15 years and produces so-called 28nm or more advanced chips will be exempted from corporate income tax for up to 10 years..

For chip makers, the grace period starts from the first profitable year.

Beijing’s new policy also focuses on funding and encourages Chinese market participants to register on local tech stock exchanges..

According to the industrial plan, the country should produce 40% of the world’s semiconductors by 2020 and 70% by 2025.. It is not yet clear how much this is in specific numbers., but this is a key focus for the government, and it was intensified in the past 18 months as tensions between China and the United States escalate.

«I think this is a new cold technology war. That is why China is scaling production and aggressively developing mainland technology under the pressure of aggressive US policies.», – told CNBC Neil Campling, Head of Technology Research, Media and Telecommunications, Mirabaud Securities.

Analysts questioned whether Beijing’s latest announcement could provide a significant boost to the semiconductor industry in the world’s second largest economy..

China relies on semiconductor manufacturers

«State Council announcement focuses mainly on tax breaks, which are unlikely to greatly stimulate the development of semiconductors in China.», – told CNBC Dan Wang, technology analyst at Beijing-based research firm Gavekal Dragonomics. 

«However, this signals that the government is very interested in supporting this sector.», – he added.

This is not the first time China’s semiconductor industry incentives have been observed. In 2014, Beijing set up a multibillion-dollar National Fund for Chip Maker Investments, and last year it established another. At the same time, China in this segment is still far behind the United States and other countries such as Taiwan and South Korea..

«Beijing has been pouring money into the semiconductor industry since the establishment of the IC National Investment Fund in 2014, and so far it has only brought local success.. This is because the sector is highly globalized, competitive and market-oriented, and companies need more than just money to capture the market.», – told CNBC Paul Triolo, Head of Geotechnology Practice, Eurasia Group.

«The preferential treatment outlined in the new policy will help in some areas, but in the short term will have only a marginal impact on the ability of Chinese semiconductor manufacturers to move up the rankings of global industry leaders.», – he thinks.

China relies on semiconductor manufacturers

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