China cuts taxes for chip makers to promote industry development

China said it cut taxes for semiconductor makers, lending new support for the pivotal industry just as US President Donald Trump weighs tariffs on the sector amid rising trade tensions.

The new rules cover a broad swathe of semiconductor companies. They will be exempt from corporate income taxes for up to five years starting January 1, the Finance Ministry said in a statement on Friday. Tax rates after that will then be half of the current 25 per cent through the 10th year.

The tax breaks follow tax cuts announced on Wednesday to benefit high-end manufacturing and innovation-driven technology companies supported by the “Made in China 2025” plan: a blueprint for the country to sharpen competitiveness in emerging industries, from information technology to aerospace.

Beijing has long tried to elevate its semiconductor industry.

China wants to reduce a reliance on some US$200 billion of annual semiconductor imports, which it fears undermines national security and hampers the development of a thriving technology sector.

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The country envisions spending about US$150 billion over 10 years to achieve a leading position in design and manufacturing, an ambitious plan that US executives and officials warn could harm American interests.

While officials have suggested their initial vision of attaining a global lead may be unrealistic, the government remains intent on finding ways to reduce imports as the world’s largest consumer of semiconductors.

For starters, a key Chinese government fund is said to be aiming to raise as much as 200 billion yuan (US$32 billion) to invest in home-grown chip companies and accelerate the country’s ambition of building a world-class semiconductor industry.

China has been offering lower taxes for integrated circuit companies since at least 2012 to encourage the development of the technology.

Requirements of companies eligible for the deduction were revised in Friday’s statement to include more up-to-date technology.

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