China re-shapes its silicon industry to boost production

The smaller the manufacturing process, the bigger the subsidies

16 Reg comments Got Tips?

China has unveiled a slate of new and more focused initiatives aimed at helping local chipmakers boost production and accelerate product development.

The new policy, unveiled by the State Council on Tuesday and charmingly named "Several Policies to Promote the High-quality Development of the Integrated Circuit Industry and Software Industry in the New Era", sets out 40 rules to support China's domestic semiconductor industry [中文] through a combination of tax concessions that become more lucrative for companies capable of working on smaller process nodes.

Semiconductor Manufacturing International Corporation and Shanghai-based Huahong, China's only sub-28nm manufacturers, will be exempted from all corporate taxes for 10 years. Other local chip-makers producing 28nm to 65nm product will have their corporate taxes halved for five years.

Other players in the semiconductor industry, including designers, outsourced semiconductor assembly and test providers (OSATS), and software developers will also receive more limited corporate tax exemptions.

The revised policy is more both more generous and more focused than previous efforts. It only applies to local companies who have been operating for 15 years or more, meaning that it is geared towards supporting established companies rather than speculating on startups.

The policy also exempts chip-makers from most import duties and allows them to pay import value-added tax in installments. Although China accounts for by far the world's most chip fabs, it is still heavily reliant on imported components to run them. Last year, it imported $305.9bn worth of integrated circuit and microassembly equipment. That sum accounted for around 15 per cent of Chinese imports of all goods across all sectors.

China hopes these policies will help it achieve a goal of producing 70 per cent of its semiconductor needs with home-baked products by 2025 as part of its “Made in China 2025” policy. To date it's missed its targets according to analysts at IC Insights. They doubt that China will reach those levels even by 2030, noting that locally made chips only made up about six per cent of the country's consumption in 2019.

The support also extends beyond tax cuts. The government promises to also help foster domestic talent, support local chip-makers in applying for IP rights and oversee their enforcement, and encourage “international cooperation” by asking multinationals to build research centres and universities in China. ®

SUBSCRIBE TO OUR WEEKLY TECH NEWSLETTER


Biting the hand that feeds IT © 1998–2020