China is pausing massive investments aimed at building a chip industry to compete with the US, as a nationwide Covid resurgence strains the world’s No. 2 economy and Beijing’s finances.
Top officials are discussing ways to move away from costly subsidies that have so far borne little fruit and encouraged both graft and American sanctions, people familiar with the matter said. While some continue to push for incentives of as much as 1 trillion yuan , other policymakers have lost their taste for an investment-led approach that’s not yielded the results anticipated, the people said.
It’s unclear what other chip policies Beijing is considering, or whether it will ultimately decide to ditch the capital investment-heavy approach that’s worked so well in propelling its manufacturing sector over the past decades. China’s government could still decide to divert resources from other arenas to fund its chipmakers. Representatives for the State Council Information Office and Ministry of Industry and Information Technology didn’t immediately respond to faxed requests for comment.
Xi’s administration grew frustrated that tens of billions of dollars funneled into the industry over the past decade haven’t produced breakthroughs that allow China to compete with the US on a more equal footing. In fact, SMIC and Yangtze, arguably the two most advanced Chinese semiconductor players, were crippled by US sanctions.
He has implored top officials to achieve self-sufficiency in key technologies as the US moves to isolate China. When he secured a precedent-breaking third term in October, Xi vowed to “move faster” in implementing strategic projects to increase innovation, saying “efforts will be made to improve the new system for mobilizing resources nationwide to make key technological breakthroughs, and boost China’s strength in strategic science and technology.
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