China Decides to Throw Money at Its Advanced Chip Technology Problem

China decided the best response to having its access to advanced chipmaking technology cut off is to throw a lot of money at the problem.

As Reuters reports(Opens in a new window), the Chinese government is thought to be working on a support package to boost domestic semiconductor research and production. The package will mainly take the form of subsidies and tax credits over a five-year period aimed at supporting research and development, but also advanced chip production on Chinese soil. Much of the money is expected to be spent on buying semiconductor fabrication equipment from Chinese firms.

In total, China is expected to offer 1 trillion yuan of support to Chinese companies, which is roughly $143 billion. For a country already suffering serious restrictions on the chip technology it has access to, the size of the investment needed to be substantial if it intends to become self-sufficient.

In comparison, the $280 billion earmarked for the US CHIPS Act earlier this year includes $52 billion in subsidies for US semiconductor production and research.

The chips China ends up producing are likely to be based on the RISC-V architecture, and quantum computing could also receive a major injection of capital. However, China’s situation is expected to deteriorate further in the next few weeks, with both Japan and the Netherlands planning to impose some or all of the same export restrictions as the US. If so, China will no longer have access to the machinery required to manufacture chips more advanced that 14nm, which is already three generations behind the state-of-the-art semiconductors.