Tech war: China doubles down on ‘whole nation’ approach to chip self-sufficiency as US tightens export controls

Liu He, the top economic aide to President Xi Jinping, said the semiconductor industry matters to ‘national security and … Chinese style modernisation’

Liu stressed that China would provide ‘equal national treatment’ to foreign experts under a policy designed to ease China’s chip talent shortage

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China’s vice-premier Liu He speaks at the World Economic Forum, in Davos, Switzerland, on January 17, 2023. Photo: EPA-EFE

Published: 6:30pm, 3 Mar 2023Updated: 6:37pm, 3 Mar 2023

China must maintain a “whole nation” approach to its semiconductor industry by leveraging both state and market power for growth, Vice-Premier Liu He told industry executives on Thursday, in a sign that Beijing is digging in for a protracted chip war with the US.

Liu, known as the top economic aide to President Xi Jinping, said at a symposium that the semiconductor industry was “the core nexus of modern industrial systems” and mattered to “national security and the progress of Chinese style modernisation”, according to a report by the official Xinhua news agency.

“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.

Liu added that the Chinese government would set “practical development goals” for the industry and help businesses solve their difficulties. In areas where there are market failures, the state would play a role by guiding long-term investment. In particular, Liu stressed that China would provide “equal national treatment” to foreign experts under a policy designed to ease China’s chip talent shortage. By 2024, China’s semiconductor industry will need nearly 800,000 workers, exceeding the local talent supply by one third.

The Xinhua summary of Liu’s speech did not mention US export controls directly, but the comments come as Beijing is expressing growing concerns about a US-led coalition it believes is aimed at containing China’s development in chip technologies.

Chinese government officials have publicly called on Japan, South Korea and the Netherlands to help maintain the stability of supply chains after Washington made progress in convincing Tokyo and The Hague to join its export control regime. A US-led Chip4 alliance involving Japan, South Korea and Taiwan is also coming into shape, while Washington has reiterated that chip makers receiving US government funding are barred from investing in advanced facilities in China for a decade.

Meanwhile, the US has for the first time moved to restrict American semiconductor talent from helping China achieve its goals. In October last year, the Biden administration restricted “US persons” – including American citizens and green card holders – from working at China-located facilities related to advanced chips.