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.
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.
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
Huawei Technologies Co’s (華為) latest high-end smartphone features more Chinese suppliers, including a new flash memory chip and an improved chip processor, a teardown analysis showed, pointing to the progress China is making toward technology self-sufficiency. The inside of Huawei’s Pura 70 Pro was examined by online tech repair company iFixit and consultancy TechSearch International, finding components made by Chinese suppliers. The firms also found that the Pura 70 phones run on an advanced processing chipset made by Chinese chip foundry Semiconductor Manufacturing International Corp (SMIC, 中芯) called the Kirin 9010, which is likely a slightly improved version of the advanced chip