China is pausing its spending on interventions in the semiconductor market meant to compete with the United States.
Chinese officials are looking to move away from the subsidies they had enacted to improve China’s chances of producing chips capable of competing with U.S. production, according to Bloomberg. The retrenchment is partly a response to the subsidies failing to produce the hoped-for results, as well as the financial pressures created by China’s struggle with COVID-19.
Leaders in China discussed alternative ways to help local chipmakers, including by lowering the costs of components. Any such effort represents a major shift in China’s tech war with the U.S., a competition that has led America to restrict Chinese access to certain advanced-tech products in recent months.
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China has invested tens of billions into the industry over the last decade, and it also developed the National Integrated Circuit Industry Investment Fund, a state-run investment fund for expanding Chinese semiconductor manufacturing capabilities. The NICIIF was used by China to help several Chinese chip manufacturers, such as Semiconductor Manufacturing International Corp. and Yangtze Memory Technologies, to develop their fabrication abilities. The companies were the targets of export controls implemented by the Biden administration to restrict access to military-grade chips.
Chinese President Xi Jinping has pushed for Chinese manufacturers to keep up with U.S. innovation due to the restrictions but has been frustrated by the country’s ability to keep up.
The production has also been heavily affected by China’s zero-COVID policy, which has slowed manufacturing and restricted product access due to the country’s strictly enforced isolation policy.
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America’s efforts to compete with China have been the focus of legislation in the last year. The CHIPS Act, which was passed last summer, provided tens of billions of dollars to manufacturers to expand their domestic factories. The law has already led to additional plants in Ohio, New York, and Arizona.
Manufacturers have also reported diminishing sales of semiconductors, leading to a surplus of chips in storage.
