China’s dream of semiconductor resilience cannot be bought with … money?
Experts agree that China will find the path of chip resilience challenging, not only because of deteriorating diplomacy, but also because it is facing a shortage of core technology skills, despite having invested billions of dollars in semiconductor talent and new facilities.
Semiconductors, also known as chips or integrated circuits (IC), are the foundation of new technologies, from artificial intelligence and 5G, to smartphones and autonomous driving. The industry has also become the focal point of the escalating trade conflict between the world’s two largest economies.
The US-China confrontation over semiconductors, will continue under Joe Biden, but a different approach may be taken, according to analysts, with the new administration taking advantage, in an effort to reduce Beijing’s chip self-reliance target.
To be sure, semiconductor self-sufficiency was a priority for Beijing, long before the US-China technology war brought the issue to the fore. China’s ambitions have been clear since 2014, when the central government announced the National Integrated Circuit Plan, which promised to invest $150 billion in the domestic semiconductor manufacturing sector.
In early December, the US added China’s top chip maker, Semiconductor Manufacturing International Corp (SMIC), to a blacklist of Chinese companies accused of military ties, a move that was likely to escalate tensions with Beijing, before President-elect Joe Biden took office.
The US has been cutting China’s access to US-sourced technology in the semiconductor sector, as good as killing the China semiconductor dream. In May, Washington extended its sanctions against Huawei Technologies, by requiring foreign chipmakers using US technology, to apply for a license to sell chips to the Chinese telecommunications champion.
In response to US sanctions, China has stepped up efforts to incubate local talent and come up with policies to promote self-reliance.
In August 2020, the State Council of China granted qualifying integrated circuit projects and businesses, a variety of tax benefits lasting up to 10 years. The new policies also focus on developing domestic chip engineering talent, enhancing protection of intellectual property rights and encouraging companies listed on the STAR Market, to focus on Chinese technology, with an aim to realizing the China semiconductor dream.
The U.S. export controls imposed on Chinese tech companies are not expected to be significantly eased under Biden. China’s technology sector is likely to be kept within the sights of US policymakers. So what will happen to the China semiconductor dream?