China readying $143 bln package for its chip firms in bid to compete with U.S. -sources

China High Speed Transmission Equipment

13/12/2022 08:09

(Adds potential beneficiaries, chip stock moves, background)
    By Julie Zhu
       HONG KONG, Dec 13 (Reuters) - China is working on a more
than 1 trillion yuan ($143 billion) support package for its
semiconductor industry, three sources said, in a major step
towards self sufficiency in chips and to counter U.S. moves
aimed at slowing its technological advances.
    Beijing plans to roll out what will be one of its biggest
fiscal incentive packages over five years, mainly as subsidies
and tax credits to bolster semiconductor production and research
activities at home, said the sources.
    The plan could be implemented as soon as the first quarter
of next year, said two of the sources who declined to be named
as they were not authorised to speak to media.
    The majority of the financial assistance would be used to
subsidise the purchases of domestic semiconductor equipment by
Chinese firms, mainly semiconductor fabrication plants, or fabs,
they said. 
    Such companies would be entitled to a 20% subsidy on the
cost of purchases, the three sources said. 
    The fiscal support plan comes after the U.S. Commerce
Department passed in October a sweeping set of regulations,
which could bar research labs and commercial data centres'
access to advanced AI chips, among other curbs.    
    And U.S. President Joe Biden in August signed a landmark
bill to provide $52.7 billion in grants for U.S. semiconductor
production and research as well as tax credit for chip plants
estimated to be worth $24 billion.
    With the incentive package, Beijing aims to step up support
for Chinese chips firms to build, expand or modernise domestic
facilities for fabrication, assembly, packaging, and research
and development, the sources said.
    Beijing's latest plan also includes preferential tax
policies for the country's semiconductor industry, they said.
    China's State Council Information Office did not immediately
respond to a request for comment.
    LIKELY BENEFICIARIES   
    The beneficiaries will be both state-owned and private
enterprises in the industry, notably large semiconductor
equipment firms like NAURA Technology Group  002371.SZ ,
Advanced Micro-Fabrication Equipment Inc China  688012.SS  and
Kingsemi  688037.SS , the sources added.  
    Some Chinese chip shares in Hong Kong rose sharply after
news of the package. Semiconductor Manufacturing International
Corp (SMIC)  0981.HK  added more than 4%, sending its daily gain
to roughly 6%. Hua Hong Semiconductor Ltd  1347.HK  surged more
than 12% so far, while mainland markets were closed at the time.
    Achieving self-reliance in technology featured prominently
in President Xi Jinping's full work report at the Communist
Party Congress in October. The term 'technology' was referred to
40 times, up from 17 times in the report from the 2017 congress.
    Xi's call for China to "win the battle" in core technologies
could signal an overhaul in Beijing's approach to advancing its
tech industry, with more state-led spending and intervention to
counter U.S. pressures, analysts have said.  urn:newsml:reuters.com:*:nL4N31I1G4
($1 = 6.9796 Chinese yuan renminbi)
 (Reporting by Julie Zhu in Hong Kong; Additional reporting by
Josh Horwitz,  Brenda Goh and Jason Xue in Shanghai, Kevin Huang
and Xu Jing in Beijing, Editing by Sumeet Chatterjee and
Muralikumar Anantharaman)
 ((julie.zhu1@thomsonreuters.com; +852 2843 6519; Reuters
Messaging: julie.zhu1.thomsonreuters.com@reuters.net))