World War 3

China’s chip suppliers have some growing up to do

2022.12.14 00:09

HONG KONG, Dec 14 (Reuters Breakingviews) – All eyes are on China’s semiconductor-equipment laggards. Beijing is readying a $144 billion fiscal package aimed at supporting tool and machinery manufacturers that are woefully behind Dutch and Japanese rivals. A combination of targeted subsidies and local demand will help. But catching up will be a years-long, if not decades-long, slog.

The planned measures mainly consist of tax credits and subsidies for Chinese companies to source equipment and tools locally, Reuters reported. They will be a much-needed response from Beijing: American officials have stepped up efforts to put pressure on governments in the Netherlands and Japan to restrict equipment exports to the People’s Republic – part of Washington’s campaign to hobble China’s progress in developing high-tech chips. New curbs could be announced “in the coming weeks”, Bloomberg reported on Monday.

China’s dependence on foreign suppliers for lithography machines, used to print patterns onto silicon wafers, light-resistant wafer coatings known as photoresists and other vital tools cannot be understated. A 2021 report found that Chinese chipmakers buy less than a fifth of their equipment by value from local suppliers and that the country has localised less than 8% of annual equipment demand. That leaves the sector heavily reliant on firms like Netherlands-based ASML (ASML.AS), which boasted a 91% global share of lithography last year and a monopoly on the most advanced machines, and Tokyo Electron (8035.T), which similarly dominates the market for photoresists, according to Bernstein analysts.

Developing local alternatives will require more than just lavish government spending. That’s a painful lesson Beijing has learned following last year’s financial implosion of its erstwhile semiconductor champion Tsinghua Unigroup and a recent corruption scandal involving a $50 billion government chip fund. China’s equipment specialists, such as little-known firms NAURA Technology Group (002371.SZ) and Advanced Micro-Fabrication Equipment (688012.SS), are probably too small to effectively absorb massive amounts of government funding anyway. A more targeted approach this time, such as incentivising demand for their products, looks more promising.

One reason is that having chipmakers and their equipment-suppliers in close proximity to each other can help accelerate collaboration in research and development. ASML, for example, already boasts five factories in Taiwan, home to its top customer TSMC (2330.TW), and has plans for another in 2023, per local media reports. For peers in China, there’s still a long way to catch up.

Reuters GraphicsReuters Graphics

Follow @mak_robyn on Twitter

CONTEXT NEWS

China is readying more than 1 trillion yuan ($144 billion) of fiscal support for its semiconductor industry, Reuters reported on Dec. 14, citing sources.

The majority of the funds will be used to subsidise the purchase of domestic semiconductor equipment by Chinese chipmakers. Qualified companies would be entitled to a 20% discount on the cost of purchases. Other measures include preferential tax policies for the industry.

Separately, White House National Security Adviser Jake Sullivan said on Dec. 13 that discussions have taken place with Japan and the Netherlands – both major suppliers of chipmaking equipment – on adopting Washington’s new technology export restrictions, unveiled in October, against China.

Editing by Antony Currie and Thomas Shum

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Robyn Mak

Thomson Reuters

Robyn Mak joined Reuters Breakingviews in 2013. Previously, she was a Research Associate for the Global Policy Programs at the Asia Society in New York where she focused on US-Iran relations, US-Myanmar relations and sustainability issues in Asia. She has also worked as a researcher at the Carnegie Endowment for International Peace in Washington DC and interned at several consulting firms, including the Albright Stonebridge Group. She holds a masters degree in international economics and international relations from the Johns Hopkins School of Advanced International Studies and is a magna cum laude graduate of New York University.



Source by [author_name]

Related Articles

Leave a Reply

Back to top button
bitcoin
Bitcoin (BTC) $ 57,014.28 0.97%
ethereum
Ethereum (ETH) $ 3,249.21 0.04%
tether
Tether (USDT) $ 1.00 0.10%
bnb
BNB (BNB) $ 396.56 1.53%
solana
Solana (SOL) $ 107.80 3.62%
staked-ether
Lido Staked Ether (STETH) $ 3,248.05 0.07%
xrp
XRP (XRP) $ 0.580874 3.80%
usd-coin
USDC (USDC) $ 1.00 0.15%
cardano
Cardano (ADA) $ 0.618287 1.74%
avalanche-2
Avalanche (AVAX) $ 39.16 1.26%
dogecoin
Dogecoin (DOGE) $ 0.09511 5.43%
tron
TRON (TRX) $ 0.143596 2.34%
chainlink
Chainlink (LINK) $ 18.88 1.90%
polkadot
Polkadot (DOT) $ 8.29 1.99%
matic-network
Polygon (MATIC) $ 1.03 3.96%
wrapped-bitcoin
Wrapped Bitcoin (WBTC) $ 56,996.27 1.30%
uniswap
Uniswap (UNI) $ 10.88 1.59%
the-open-network
Toncoin (TON) $ 2.17 0.36%
shiba-inu
Shiba Inu (SHIB) $ 0.000011 5.04%
internet-computer
Internet Computer (ICP) $ 12.87 2.35%
bitcoin-cash
Bitcoin Cash (BCH) $ 291.69 5.75%
litecoin
Litecoin (LTC) $ 74.10 2.12%
dai
Dai (DAI) $ 1.00 0.04%
immutable-x
Immutable (IMX) $ 3.34 3.32%
cosmos
Cosmos Hub (ATOM) $ 11.18 2.13%
blockstack
Stacks (STX) $ 2.97 4.73%
filecoin
Filecoin (FIL) $ 8.11 2.36%
leo-token
LEO Token (LEO) $ 4.40 1.17%
near
NEAR Protocol (NEAR) $ 3.91 3.46%
ethereum-classic
Ethereum Classic (ETC) $ 28.01 2.08%
kaspa
Kaspa (KAS) $ 0.168988 2.30%
bittensor
Bittensor (TAO) $ 603.22 2.20%
hedera-hashgraph
Hedera (HBAR) $ 0.109907 2.69%
aptos
Aptos (APT) $ 10.01 2.24%
injective-protocol
Injective (INJ) $ 40.73 10.63%
optimism
Optimism (OP) $ 3.75 3.45%
vechain
VeChain (VET) $ 0.048265 2.50%
stellar
Stellar (XLM) $ 0.121057 1.20%
first-digital-usd
First Digital USD (FDUSD) $ 1.00 0.12%
lido-dao
Lido DAO (LDO) $ 3.46 3.34%
okb
OKB (OKB) $ 51.26 0.49%
mantle
Mantle (MNT) $ 0.868016 6.90%
celestia
Celestia (TIA) $ 16.63 3.31%
render-token
Render (RNDR) $ 7.25 3.10%
crypto-com-chain
Cronos (CRO) $ 0.101379 1.51%
the-graph
The Graph (GRT) $ 0.284413 0.06%
monero
Monero (XMR) $ 139.34 4.19%
arbitrum
Arbitrum (ARB) $ 1.86 4.02%
sei-network
Sei (SEI) $ 0.874726 4.17%
maker
Maker (MKR) $ 2,152.12 0.57%