China in chip wars with US as it ploughs $143bn into its semiconductor industry

China is set to launch a support package for its semiconductor industry totaling over 1 trillion yuan ($143 billion) – one of the biggest fiscal incentives packages the industry has seen in over five years, according to reports.

According to three Reuters’ sources, the investment not only marks the country’s latest step towards self-sufficiency in chips, but it has also been prompted in retaliation to the US’ attempts to slow its technological advances.

In August this year, US President Joe Biden green-lighted a landmark bill to provide $52.7bn in grants for US semiconductor production and research, as well as tax credit for chip plants estimated to be worth $24bn.

China’s new package, spearheaded by its capital, could be imported as soon as the first quarter of 2023, with most of the funding being used to subsidise the purchase of domestic semiconductor equipment by Chinese firms.

The Reuters’ source added that Beijing intends to ramp up Chinese chip firms, expand or modernise domestic facilities for fabrication, assembly, packaging and research & development. These firms will also be entitled to a 20% subsidy on the cost of purchases, all sources added.

The latest plan also includes preferential tax policies for the country’s semiconductor industry, according to the sources.