China preps $143 billion chip support action, goes to WTO

China preps $143 billion chip support action, goes to WTO

Business news |
By Peter Clarke

China is preparing a five-year support package for its chip sector worth more than 1 trillion yuan (US$143 billion), according to reports.

The move reinforces the decoupling of China from the West as a result of the rising tension between the US and China over semiconductors, now seen as major strategic resource. At the same time China has launched a complaint with the World Trade Organization (WTO) opposing tough export controls being imposed by the US, according to Reuters.

The United States Department of Commerce increased the stringency of export controls in October (see Advanced logic, memory, YMTC come under China export controls) with the consequence that Chinese chip makers are struggling to get supplies and support for chipmaking equipment.

Three times the size

US government officials have been trying to tighten the international nature of the embargo. Talks have been held with government officials in The Netherlands – home of lithography equipment maker ASML Holding NV – and Japan – home to such firms as Tokyo Electron Ltd. encouraging them to stay in line.

As a result, China is preparing a five-year package of subsidies and tax credits to encourage and support domestic semiconductor production, according to unnamed sources referenced by Reuters. The plan could start in 1Q23.

The plan is about three times the size of the US Chips Act that pledges US$52 billion of support and the imminent European Chips Act that is set to provide €42 billion (about US$45 billion)

China’s plan would include a 20 percent subsidy on the purchase of domestic chipmaking equipment by Chinese wafer fabs. It would also be used to support the expansion of wafer fabs, assembly and packaging plants and R&D facilities.

Who benefits?

Chinese domestic companies such as Naura Technology Group, Advanced Micro-Fabrication Equipment Inc. China (AMEC) and KingSemi Co. Ltd. are set to benefit.Shanghai Micro Electronics Equipment Group Co. Ltd (SMEE), is China’s only lithography company. However, while these companies can support chip manufacturing on more mature process nodes none can compete at the leading-edge, which currently stands at about 3nm.

Therefore, whatever the size of the support package it is unlikely to help China in the near- to medium-term. China needs to spend on R&D to develop techniques such as immersion-deep ultraviolet lithography and extreme ultraviolet (EUV) lithography and across a breadth of chipmaking technologies.

Hence, China’s launch of a trade dispute action with the WTO. Although, this is unlikely to be effective at changing US action to deprive China of access to leading-edge semiconductor capability.

The WTO, an organization which most countries are signed up to, has been largely ignored on the semiconductor front in the last couple years. Countries have started to provide domestic subsidies to their national and regional champion chip companies and inward investors. In the meantime, it has been left to lawyers to try and draw up fig leaves to cover the potential breaches of WTO undertakings.

Related links and articles:

Advanced logic, memory, YMTC come under China export controls

US export controls’ reach extends to Chinese displays

Report: Huawei, Shenzhen support creation of local foundry

US adds high-end GPUs to China AI embargo


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