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China rethinks its policies to support domestic chip industry amid US restrictions

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In an attempt to subtle the blow by the West, China is giving its most successful chip companies easier access to subsidies and more control over state-backed research. The south-east Asian country is undergoing a major rethink to support its chip manufacturing sector due to the United States' tightened controls on access to advanced chipmaking technology.

Companies such as Semiconductor Manufacturing International, Hua Hong Semiconductor, Huawei, Naura, and Advanced Micro-Fabrication Equipment are likely to benefit from the changes in policy. The move also follows the creation of a new Communist party science commission as well as a revived Ministry of Science and Technology aiming to increase the collaboration between the government and select firms. The chosen companies will have easier access to state funding, without the need to meet performance targets.

A person with direct knowledge of the new policy told the Financial Times, "The Chinese government will subsidize these companies to produce and deploy localized chipmaking tools without any funding cap, just in order to overcome US restrictions". The shift in policy is an admission that China's previous subsidization attempts to build up domestic capabilities in the semiconductor industry was unsuccessful and no longer viable under current US restrictions.

The Biden administration's export restrictions on advanced chips have severly impacted China's semiconductor sector, while a tri-lateral agreement between the U.S., Japan, and the Netherlands will prevent China from acquiring the latest chipmaking equipment.

Source: Financial Times (paywall)

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