China investing $143B in chip industry

China is working on a more than 1 trillion yuan ($144bn) support package for its semiconductor industry, according to three sources, in a significant step towards self-sufficiency in chips aimed at countering the United States’ moves to slow its technological advances.

Beijing plans to roll out what will be one of its biggest fiscal incentive packages, allocated over five years, mainly as subsidies and tax credits to bolster semiconductor production and research activities at home, the sources said.

The beneficiaries will be both state-owned and private enterprises in the industry, notably large semiconductor equipment firms like NAURA Technology Group, Advanced Micro-Fabrication Equipment Inc China, and Kingsemi, the sources said.

Stocks of Chinese chipmakers jumped in early trading on Wednesday after news of the package. China’s SSE STAR Chip Index opened nearly 4 percent higher. Shanghai-listed shares of industry giant Semiconductor Manufacturing International Corp (SMIC) rose as much as 5.2 percent to a four-month high.

Some Chinese chip shares in Hong Kong also rose sharply on Tuesday following the Reuters report. SMIC added more than 8 percent, sending its daily gain to nearly 10 percent. Hua Hong Semiconductor Ltd closed up 17 percent. Mainland markets were closed when the report was published.

NAURA’s etching and thermal process equipment, for example, can only produce 28-nanometre and above chips – relatively mature technologies.

Shanghai Micro Electronics Equipment Group Co Ltd (SMEE), China’s only lithography company, can produce 90-nanometre chips, well behind that of the Netherlands’ ASML, which is producing those as thin as 3 nanometers.