China chip stocks surge on hint of big new state subsidies
Shares of China’s semiconductor makers and their suppliers surged on Wednesday (December 14) on reports they may receive new government subsidies and tax benefits beginning in 2023. The Chinese government plans to spend 1 trillion yuan (US$143 billion) to support companies that develop or make their own semiconductors over the next five years, Reuters reported. Chipmakers could be subsidized up to 20% of their expenses paid on Chinese chip-making tools and raw materials, the report said. Analysts said the new measures would encourage Chinese chipmakers and their suppliers to boost investments in research and development. The apparent move towards greater subsidies comes after the US Department of Commerce added China’s top memory chipmaker YMTC and 30 other Chinese entities in October to an unverified list and banned them from purchasing US high-end chips and chipmaking tools. The Biden administration will put these companies on an “Entity List” as early as this week, Bloomberg reported. Japan and the Netherlands have agreed in principle to join the US in tightening controls on exports of advanced chip-making machinery to China, reports said. Beijing has poured tens of billions of dollars into the semiconductor industry over the past decade, but has not yet achieved the desired high-end results, according to media reports. In mid-July, Xiao Yaqing, the then-Chinese minister of industry and information technology, was arrested for suspected violations of the Communist Party’s discipline and laws. Several other officials and executives of the National Integrated Circuit Industry Investment Fund – also known as the Big Fund – and Tsinghua Unigroup were also arrested on accusations of misusing public funds. Li Guojie, chief scientist of the Chinese Academy of Sciences (CAS), wrote in an article on October 17 that China did not have three-quarters of the 164 parts used in extreme ultraviolet (EUV) lithography, which is used to make 14nm chips. China is doubling down on its indigenous chip-making capabilities while Taiwan is already on the cutting edge. Image: Twitter Li said China would not likely be able to make deep ultraviolet (DUV) lithography, five-generation older equipment, any time soon. He suggested that China should now focus on mature technologies used to make 28nm to 55nm chips. Citing unnamed sources, Reuters reported on Tuesday that the Chinese government was preparing a more than 1 trillion yuan package to support its domestic chip-making industry in response to intensifying US export bans. Chinese chipmakers will be provided subsidies and tax credits to purchase domestic semiconductor equipment in the first quarter of 2023, the report. Fabrication, assembly and packaging equipment makers would all benefit from the state support, it said. Shares of MEMSensing Microsystems, which makes photodiodes, surged 20% while Jiangsu Dagang, an integrated circuit packaging firm, increased 16% on Wednesday. Zhejiang MTCN Technology, a supplier of monocrystalline silicon materials, rose 10%. Other chip firms such as Advanced Micro, Naura Technology Group and Piotech also climbed. Sealand Securities said Chinese chip makers’ shares had previously declined in the industry’s downcycle and were now attractive to investors. It said the changes in overseas situations, which refer to the US sanctions, would push Chinese chipmakers to buy more domestic equipment in pursuit of technological breakthroughs. Shenwan Hongyuan Securities said China’s chip market would be supported by government subsidies and growing demand for auto chips in 2023. It said chip giants would continue to benefit from Chinese government support but those that make chips for consumer electronics and home appliances would continue to suffer due to high chip inventories heading into next year. At the same time, US restrictions are set to intensify. US Commerce Secretary Gina Raimondo asked Japanese industry minister Yasutoshi Nishimura in a phone call on December 9 for cooperation in hindering China’s efforts to develop high-end semiconductors, the Japan Times reported. Jake Sullivan, national security adviser at the White House, said Monday that the US was discussing with Japan and the Netherlands about banning China from obtaining high-end chips and chip-making equipment. On Tuesday, Bloomberg reported that Japan and the Netherlands had agreed in principle to join US-led technology export controls, despite the negative impacts it would have on Japan’s Tokyo Electron Ltd and Dutch lithography maker ASML Holding NV. It also reported the US Department of Commerce would add YMTC and 35 other Chinese firms on its Entity List as early as this week. US companies will have to seek a special license to ship their technology products, both low-end and high-end, to those on its Entity List. Over the past two months, some Chinese chipmakers have reportedly invited US trade officials to inspe
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Shares of China’s semiconductor makers and their suppliers surged on Wednesday (December 14) on reports they may receive new government subsidies and tax benefits beginning in 2023.
The Chinese government plans to spend 1 trillion yuan (US$143 billion) to support companies that develop or make their own semiconductors over the next five years, Reuters reported. Chipmakers could be subsidized up to 20% of their expenses paid on Chinese chip-making tools and raw materials, the report said.
Analysts said the new measures would encourage Chinese chipmakers and their suppliers to boost investments in research and development.
The apparent move towards greater subsidies comes after the US Department of Commerce added China’s top memory chipmaker YMTC and 30 other Chinese entities in October to an unverified list and banned them from purchasing US high-end chips and chipmaking tools.
The Biden administration will put these companies on an “Entity List” as early as this week, Bloomberg reported. Japan and the Netherlands have agreed in principle to join the US in tightening controls on exports of advanced chip-making machinery to China, reports said.
Beijing has poured tens of billions of dollars into the semiconductor industry over the past decade, but has not yet achieved the desired high-end results, according to media reports.
In mid-July, Xiao Yaqing, the then-Chinese minister of industry and information technology, was arrested for suspected violations of the Communist Party’s discipline and laws. Several other officials and executives of the National Integrated Circuit Industry Investment Fund – also known as the Big Fund – and Tsinghua Unigroup were also arrested on accusations of misusing public funds.
Li Guojie, chief scientist of the Chinese Academy of Sciences (CAS), wrote in an article on October 17 that China did not have three-quarters of the 164 parts used in extreme ultraviolet (EUV) lithography, which is used to make 14nm chips.
Li said China would not likely be able to make deep ultraviolet (DUV) lithography, five-generation older equipment, any time soon. He suggested that China should now focus on mature technologies used to make 28nm to 55nm chips.
Citing unnamed sources, Reuters reported on Tuesday that the Chinese government was preparing a more than 1 trillion yuan package to support its domestic chip-making industry in response to intensifying US export bans.
Chinese chipmakers will be provided subsidies and tax credits to purchase domestic semiconductor equipment in the first quarter of 2023, the report. Fabrication, assembly and packaging equipment makers would all benefit from the state support, it said.
Shares of MEMSensing Microsystems, which makes photodiodes, surged 20% while Jiangsu Dagang, an integrated circuit packaging firm, increased 16% on Wednesday. Zhejiang MTCN Technology, a supplier of monocrystalline silicon materials, rose 10%. Other chip firms such as Advanced Micro, Naura Technology Group and Piotech also climbed.
Sealand Securities said Chinese chip makers’ shares had previously declined in the industry’s downcycle and were now attractive to investors. It said the changes in overseas situations, which refer to the US sanctions, would push Chinese chipmakers to buy more domestic equipment in pursuit of technological breakthroughs.
Shenwan Hongyuan Securities said China’s chip market would be supported by government subsidies and growing demand for auto chips in 2023.
It said chip giants would continue to benefit from Chinese government support but those that make chips for consumer electronics and home appliances would continue to suffer due to high chip inventories heading into next year.
At the same time, US restrictions are set to intensify. US Commerce Secretary Gina Raimondo asked Japanese industry minister Yasutoshi Nishimura in a phone call on December 9 for cooperation in hindering China’s efforts to develop high-end semiconductors, the Japan Times reported.
Jake Sullivan, national security adviser at the White House, said Monday that the US was discussing with Japan and the Netherlands about banning China from obtaining high-end chips and chip-making equipment.
On Tuesday, Bloomberg reported that Japan and the Netherlands had agreed in principle to join US-led technology export controls, despite the negative impacts it would have on Japan’s Tokyo Electron Ltd and Dutch lithography maker ASML Holding NV.
It also reported the US Department of Commerce would add YMTC and 35 other Chinese firms on its Entity List as early as this week. US companies will have to seek a special license to ship their technology products, both low-end and high-end, to those on its Entity List.
Over the past two months, some Chinese chipmakers have reportedly invited US trade officials to inspect their production lines in bids to get removed from the unverified list.
On Monday, China’s Ministry of Commerce said it had launched a trade complaint at the World Trade Organization against the US over its chip export control measures.
Chinese Foreign Ministry spokesman Wang Wenbin said Tuesday that the US’s abuse of export control measures had hindered normal international trade of chips and other products and distorted the global supply chain of semiconductors.
“Countries need to stand up and say no to Washington’s unilateralism and protectionism,” Wang said. “This is a cause that bears on the stability of the global trading system, and more importantly, whether international justice can prevail.”
Read: US chip ban hangs over Shanghai’s new AI center
Follow Jeff Pao on Twitter at @jeffpao3
