Thu, Jan 05, 2023 page11

• China puts giant chip spending on ice

  BEING DISCUSSED: Some policymakers have lost their taste for the investment-led approach, which has borne little fruit, and has led to graft and US sanctions

  • Bloomberg
  • • 
    • 
    • 

  China is pausing massive investments aimed at building a chip industry to compete with the US, as a nationwide COVID-19 resurgence strains the world’s No. 2 economy and Beijing’s finances.

  Top officials are discussing ways to move away from costly subsidies that have so far borne little fruit, and encouraged graft and US sanctions, people familiar with the matter said.

  While some continue to push for incentives of as much as 1 trillion yuan (US$145 billion), other policymakers have lost their taste for an investment-led approach that has not yielded the results anticipated, the people said.

  

  A woman takes a selfie in front of a semiconductor display at the Appliance and Electronics World Expo in Shanghai, China, on March 23, 2021.

  Photo: Reuters

  Instead, they are seeking alternative ways to assist homegrown chipmakers, such as lowering the cost of semiconductor materials, the people said, asking not to be identified revealing sensitive negotiations.

  That would mark a shift in Beijing’s approach toward an industry regarded as crucial to challenging US dominance, and safeguarding Chinese economic and military competitiveness.

  It underscores how the country’s economic ructions are taxing Beijing’s resources and hobbling its chip ambitions — one of Chinese President Xi Jinping’s (習近平) top priorities.

  That could have ramifications for spending in other critical areas, from the environment to defense.

  It is unclear what other chip policies Beijing is considering, or whether it would ultimately decide to ditch the capital investment-heavy approach that has worked so well in propelling its manufacturing sector over the past decades.

  The government could still decide to divert resources from other arenas to fund its chipmakers.

  The discussions under way are in stark contrast to Beijing’s prior efforts of pouring colossal resources into the chip industry, including setting up the National Integrated Circuit Industry Investment Fund in 2014.

  That vehicle lies at the heart of Xi’s unhappiness with Beijing’s prior philosophy. Known within the industry as the Big Fund, it drew about US$45 billion in capital and backed scores of companies, including China’s chipmaking champions Semiconductor Manufacturing International Corp (SMIC, 中芯國際) and Yangtze Memory Technologies Co (長江儲存).

  Xi’s administration grew frustrated that tens of billions of dollars funneled into the industry over the past decade have not produced breakthroughs that allow China to compete with the US on a more equal footing. SMIC and Yangtze, arguably the two most advanced Chinese semiconductor players, were crippled by US sanctions.

  Senior Beijing officials ordered a flurry of anti-graft probes into top industry figures last summer, blaming corruption for wasted and inefficient investment.

  The Big Fund is likely to lose its stature as a result, the people said.

  Chinese officials recently discussed whether to offer additional incentives for domestic semiconductor companies, the people said.

  However, many reckoned it would be difficult to pool a substantial amount after Beijing had spent heavily to combat COVID-19 over past years, they said.

  Instead, officials are now asking local semiconductor material suppliers to cut prices to provide support to their domestic customers, they added.

  Weak tax revenue, declining land sales and the cost of stemming COVID-19 have squeezed the government’s finances, pushing the fiscal deficit to a record last year.

  Meanwhile, the US is proving increasingly aggressive in going after China’s technological ambitions.

  Last year, it accelerated a campaign to contain Beijing’s chip endeavors, wielding various tools, including export controls, to deter China’s progress in emerging technologies.

  That was part of efforts to maintain what US National Security Adviser Jake Sullivan called “as large of a lead as possible.”

  Its key allies, including the Netherlands and Japan, have also agreed in principle to tighten controls over the export of advanced chipmaking machinery to China, Bloomberg News has reported, in what might be another potentially debilitating blow to Beijing’s grand chip plans.
• Most Popular

  • 1

    Greek basketball finals suspended following scuffles

  • 2

    Control Yuan member quits over misuse of vehicle

  • 3

    PSG crush Inter to win trophy

  • 4

    Taipei ranks 60 in ‘Global Cities Index,’ up five spots

  • 5

    Taiwan denies hacking, as China issues bounties