BEIJING: As part of Beijing's push for self-reliance in the greater chip sector amid increased US competition, local governments in China are increasing financial incentives and policy support for domestic semiconductor firms.

Local governments in places like Shenzhen are lagging behind more established semiconductor hubs like Shanghai by announcing new policies and new funding to support semiconductor companies. This is part of a larger effort to support the country's efforts to be less dependent on foreign technology.

Some bold plans have surfaced in areas that were not previously on China's semiconductor radar. The eastern Zhejiang province prefecture-level city of Lishui has joined the cause by implementing a number of initiatives to support the regional chip industry.

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Hu Jintao, the son of the former Chinese president, is in charge of the city.
According to a WeChat article posted on the local government's account last Friday, the government is rewarding chip design companies that have created original, copyrighted products.

In addition, if the chip design enterprise's annual revenue exceeds 20 million (US$2.78 million), 100 million and 500 million yuan, the government will provide subsidies of 300,000, 1 million and 5 million yuan, respectively.

Government rewards for chip manufacturing and materials companies will be 50 million, 10 million, 20 million and 50 million yuan, with sales exceeding 500 million, 1 billion, 2 billion and 5 billion yuan, respectively.

According to a government article, Lishui, which is a part of the Yangtze River Delta, has recently made a "zero to one leap" in the development of its semiconductor industry, when the new industry plan of Zhejiang province introduced its "special platform". recognized.

The article quoted Xia Zhiming, a representative of the Lishui local government, as saying that "the policy issued this time has clear direction, precise force, high gold content, strong relevance and strong support."

Separately, Nanjing, the provincial capital of eastern Jiangsu, has unveiled plans to support its semiconductor sector. According to a recent announcement, the government will accelerate the development of several industries including software and information services, smart grids, integrated circuits and biomedicine.

Shanghai, already renowned as the country's financial center, has since branded itself as China's semiconductor highland, with the city reportedly accounting for one-quarter of the country's semiconductor value generation and its Chip owns 40% of the talent.

The city, which enforced a strict lockdown to combat the Covid-19 outbreak this year, outlined its ambition to become a base for "future industries" amid the US-China tech war in guidelines published by the local government earlier this month. declare.

Shenzhen, a traditional hub for electronics and software in China's south, is playing catch-up to expand its position in the chip value chain.

The government pledged to contribute up to 10 million yuan annually to help cover a portion of the cost for regional chip design companies to purchase the IP cores needed to advance their research.

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In addition, as part of a new strategy unveiled earlier this month, it is offering cash incentives of up to 30 million yuan to entice leading chip companies to locate in the city.

In June and July, the capital of Hefei, eastern Anhui province, and Hangzhou, Zhejiang province, both unveiled subsidy programs and strategic plans to support domestic semiconductor technologies.

While tensions with the US have risen, the self-reliance movement has experienced both success and failure.
The China National Integrated Circuit Industry Investment Fund, also known as the Big Fund, was established in 2014 by the central government to support and nurture promising start-ups as part of the country's push toward self-reliance Was.

Local governments have poured money into the industry in response to Beijing's call, but some of these efforts have been thwarted by a lack of knowledge and lack of attention.

Additionally, this year, state corruption investigations have been opened against several important Big Fund executives, and some local projects, such as Hongxin Semiconductor Manufacturing Company, the brainchild of the Wuhan government, have failed.

According to a report released last month by semiconductor consultancy ICWise, to save money and prevent wastage of resources, local governments should be "cautious" and develop policies with a longer term in mind.

The report said that instead of jumping on board hastily due to semiconductors being a scientific field, "[the government] needs to respect professionalism and study growth patterns."

Local governments should carefully examine their own premise and benefits to determine where they currently stand in the value chain and prevent siphoning off local finances.

Wei Shaojun, president of the integrated circuit design branch at the China Semiconductor Industry Association, believes that greater support from both the central and local governments of China is necessary to advance the semiconductor industry. "There won't be momentum for development in the future if we don't have continuous R&D input," Wei said in August.

At a crucial meeting last month, President Xi Jinping also emphasised the need for China to accelerate the development of technology essential to national security and implement a top-down "new whole country system" in order to seek out breakthroughs.

Since the US tightened its control over Chinese companies' access to advanced technology, with the semiconductor sector as a primary target, the task has become more urgent.

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In order to prevent China from obtaining advanced computing chips, the US Department of Commerce's Bureau of Industry and Security updated export-control regulations twice earlier this month, placing restrictions on 31 Chinese businesses, research institutions, and related organisations.

The participation of "US persons" in the construction of chip facilities in China is also subject to restrictions.