Reuters: China plans to support 1 trillion chips! Implemented in Q1 of next year at the earliest!

According to Reuters Hong Kong, China is working on a US$143.9 billion, equivalent to RMB1,004.6 billion, which could be implemented as early as the first quarter of 2023.

HONG KONG, Dec 13 (Reuters) — China is working on a support package of more than 1 trillion yuan ($143 billion) for its semiconductor industry, three sources said. This is an important step towards chip self-sufficiency and countering U.S. initiatives aimed at slowing its technological progress.

Sources say this is one of its largest fiscal incentive packages in the next five years, mainly in the form of subsidies and tax credits. Most of the financial aid will be used to subsidize Chinese companies to buy semiconductor equipment for wafer manufacturing. That is, the purchase of semiconductor equipment will be able to obtain a 20% subsidy for procurement costs.

It is reported  that as soon as the news came out, Hong Kong semiconductor stocks continued to rise at the end of the day: Hua Hong Semiconductor rose more than 12%, hitting a new high in recent times; Solomon Semiconductor rose more than 7%, SMIC rose more than 6%, and Shanghai Fudan rose more than 3%.

Beijing plans to roll out one of its biggest financial incentive programs within five years, mainly subsidies and tax credits, to support domestic semiconductor production and research activities, the sources said.

Two sources, who spoke on condition of anonymity, said the plan would be implemented as soon as the first quarter of next year because they were not authorized for media interviews.

They said most of the financial aid would be used to subsidize Chinese companies to buy domestic semiconductor equipment, mainly semiconductor fabs or fabs.

The companies will be entitled to a 20 percent subsidy for procurement costs, three sources said.

The financial support package comes after the Commerce Department passed a sweeping set of regulations in October that could ban the use of advanced AI chips in research labs and commercial data centers.

U.S. President Joe Biden signed a chip bill in August that provides $52.7 billion in grants for U.S. semiconductor production and research and tax credits for chip factories worth an estimated $24 billion.

Through the incentive program, Beijing will increase support for Chinese chip companies to build, expand or modernize domestic manufacturing, assembly, packaging and research and development facilities, the sources said.

Beijing’s latest plan also includes tax incentives for China’s semiconductor industry, they said.

China’s State Council Information Office did not immediately respond to a request for comment.

Possible beneficiaries:

The beneficiaries will be state-owned and private players in the sector, especially large semiconductor equipment companies such as NAURA Technology Group (002371.SZ) Advanced Micro-Fabrication Equipment Inc, the sources added China (688012.SS) and Kingsemi (688037.SS).

After the news, some Chinese chip stocks in Hong Kong rose sharply. SMIC (0981.HK) rose more than 4 percent, up about 6 percent on a day. So far, Hua Hong Semiconductor (1347. HK) shares surged more than 12 percent while mainland stocks closed at the close.

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Post time: Dec-30-2022