Tech war: southwestern tech hub Chengdu offers US$72 million in subsidies to local semiconductor projects amid China’s chip self-sufficiency drive

The subsidies form part of 12 new policies unveiled this week by Chengdu’s municipal government to support the city’s semiconductor sector
It reflects a broader trend among local governments across China to pursue programmes in line with Beijing’s chip self-sufficiency drive

Semiconductors

Ann Caoin Shanghai

Published: 7:30pm, 10 Mar 2023

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The municipal government of Chengdu, China’s inland electronics and technology hub, is offering up to 500 million yuan (US$72 million) in subsidies to local semiconductor companies for major chip projects, as more cities answer the central government’s call to boost development of the country’s integrated circuit (IC) industry amid a tech war with the US.

Local authorities in Chengdu, capital of southwestern Sichuan province, unveiled the subsidies on Thursday as part of 12 new policies to support the local semiconductor sector, according to a report by the official Chengdu Daily.

The subsidies will cover “major projects in integrated circuit manufacturing, packaging and testing, equipment and materials”, according to the report, citing the announcement made by the city’s Economic and Information Technology Bureau.

Under the new policies, certain “top talent” in the local semiconductor sector can receive an annual award of 500,000 yuan plus a one-off award of 3 million yuan, while each of the teams they are a part of can get 15 million yuan in financial support.

An aerial view of Chengdu, capital of southwestern Sichuan province. Photo: Shutterstock

Chengdu’s semiconductor sector recorded total revenue of 51.6 billion yuan last year, up 17 per cent from 2021, which marked a major achievement after US chip giant GlobalFoundries closed its joint venture factory in the city in 2020.

Days before Chengdu’s announcement, local authorities in the Jiangbei New District of Nanjing, capital of eastern Jiangsu province, announced a programme that offers up to 20 million yuan in subsidies to semiconductor firms in the city, according to a People’s Daily report.

Nanjing is viewed as an IC production powerhouse in China because it is home to a major foundry run by Taiwan Semiconductor Manufacturing Co, the world’s largest contract maker of advanced chips. The company in October secured a one-year waiver from the US to import chip-making equipment for its local plant, which is focused on 28-nanometre and 16-nm process nodes.

The IC-focused initiatives in Chengdu and Nanjing reflect a broader trend among local governments across China to pursue programmes that support the country’s drive for semiconductor self-sufficiency, countering the US government’s strategy of tech containment.

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In February, Chinese manufacturing hub Suzhou, the most populous city in eastern Jiangsu province, announced that it is targeting a 20 per cent increase in the output of its semiconductor sector.

That followed similar semiconductor-related programmes launched by the Jiangsu provincial government, as well as the municipal governments of Guangzhou, Hangzhou and the southern tech hub of Shenzhen.

Chinese president Xi Jinping has emphasised tech self-reliance repeatedly in the country’s “two sessions”, the annual parliamentary meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference, according to comments published by state media outlets.

China must maintain a “whole nation” approach to its semiconductor industry by leveraging both state and market power for growth, Vice-Premier Liu He, known as Xi’s top economic aide, told industry executives at a symposium two days before the opening of the parliamentary meetings on March 4.

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“General Secretary Xi Jinping has attached high importance to the development of the integrated circuit industry, and he has repeatedly made written and verbal instructions on the matter,” Liu told delegates at the gathering in Beijing.

More government measures to support the domestic semiconductor industry might be on the way during the “policy window period” after the “two sessions”, according to a Citic Securities report last week.

“Judging from the development experience of the US, Japan, South Korea and Taiwan, government policy guidance, talent training, downstream industrial clusters and continuous capital investment are all indispensable elements,” the state-owned investment bank’s report said. “From the perspective of current industrial security, semiconductor equipment, components, materials, high-end chips and other ‘bottlenecks’ are expected to be promoted by policies.”