China is preparing a $143 billion package for its semiconductor firms amid curbs and sanctions by the US

The United States has been planning to topple China as a major player in the world’s semiconductor trade and hence made it easy for TSMC and other Taiwanese chip manufacturing companies to set up factories in the US. Not to be outdone, China has decided to infuse more than 1 trillion yuan or about $143 billion into its semiconductor industry to become self-sufficient in chips, and to counter the US going after China’s technological advances.

Beijing plans to roll out what will be one of its biggest incentive packages over a period of five years. This will be in the form of subsidies and tax credits to local manufacturers and companies who set up their production plants in India, and help China bolster its semiconductor production and research activities at home, said the sources.

Chip manufacturing and controlling the global semiconductor trade has become a volatile issue over the last two years, especially because of China and Taiwan’s relationship. China considers Taiwanese-manufactured chips as an essential cornerstone of its technological might.

China’s plan and the first phase of the package could be implemented as soon as the first quarter of next year. 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. A large portion of this money will go to setting up China’s own lithography system and cracking using UV light to manufacture semiconductors. This follows the Netherlands’ decision to curb exports to China. 

 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. The United States has also been lobbying some of its partners, including Japan and the Netherlands, to tighten exports to China of equipment used to make semiconductors

With the incentive package, Beijing aims to step up support for Chinese chip firms to build, expand or modernise domestic facilities for fabrication, assembly, packaging, and research and development. Beijing’s latest plan also includes preferential tax policies for the country’s semiconductor industry.