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


Fri, March 3, 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.

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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.

Due to its curtailed access to advanced semiconductors for smartphones - as well as the equipment and materials needed to make them - Chinese companies have instead invested heavily in mature-node chips for applications in cars and home appliances.

Liu said China has already developed "a relatively complete semiconductor supply chain" with "very strong capabilities at home in some segments". "In particular, China has a large chip consumption market ... this is the most precious resource for China and a strategic advantage to promote the semiconductor industry," Liu was quoted by Xinhua as saying.

Local Chinese governments, from Shenzhen to Shanghai, are offering incentives to develop semiconductor projects. The city of Suzhou, near Shanghai, is targeting a 20 per cent increase in the output of its semiconductor industry this year.

China's top memory chip maker Yangtze Memory Technologies Co, which was added to a US trade blacklist last year, has received a US$7 billion capital boost from state-backed investors, including the China Integrated Circuit Industry Investment Fund, or Big Fund, which was hit by a series of corruption scandals last year.

Separately, Chinese private investors are also betting on chips. Chinese smartphone giant Xiaomi announced on Thursday a new fund of 10 billion yuan (US$1.4 billion), along with other partners, to invest in "integrated circuits, and the related upstream and downstream fields".
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