China Slashes Taxes To Boost Its Chipmaking Industry

The Chinese government is turning to tax breaks to boost its lagging semiconductor industry in the face of continuing efforts by the US government to restrict chip supplies to the country.

China’s Finance Ministry and other agencies announced that chipmakers could import machinery and raw materials without paying taxes through 2030, the Associated Press (AP) said. Beijing didn’t provide a specific number as to how large that subsidy might represent.

The end date of 2030 is notable because Beijing wants the country to produce 70% of all the chips it consumes by 2025. Last year, it only produced 5.9%, making it extremely dependent on Western technologies as well as chip manufacturers that are located in countries allied with the US.

Following US sanctions, China’s companies have already been buying and hoarding chips and used chipmaking machines from other countries. The chip-hoarding has obviously contributed to the global chip shortage, while the machine purchases have sent the prices of used equipment to astronomical levels.

China is also taking other measures to ramp up domestic production of chips. According to CNBC, SMIC – China’s largest chipmaker – is building a new US$2.35 billion (~RM9.8 billion) plant in Shenzen with partial funding from the city government. SMIC is among the Chinese companies blacklisted by the US government.

On the American side, Intel is building two factories in Arizona for US$20 billion (~RM82.6 billion) and is planning more in the US as well as Europe. In many ways, it looks like the chips race is definitely in full gear right now.

(Source: AP, CNBC.)

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