Beijing to boost domestic semiconductor industry in next five-year plan

According to a Bloomberg report, the Chinese government is preparing a set of policies to boost its domestic semiconductor industry in its next five-year plan, countering restrictions on silicon with US origins imposed by the White House.

Amid the US-China trade war, US President Donald Trump has imposed a series of restrictions designed to cripple dozens of influential Chinese tech giants like Huawei, which use some American hardware and software in their products. In May, Trump introduced new restrictions to cut off Huawei’s supplies of silicon with American origins.

The restrictions are posing multiple challenges for Huawei, with the restrictions cited as a reason for the UK government U-turning on its decision to permit Huawei to contribute to the UK 5G rollout, and key supplier TSMC forced to stop taking orders for Huawei’s high-end Kirin 9000 chips after 15 September.

Huawei does not currently have the capacity to manufacture the chips itself, while Shanghai-based foundry SMIC also lacks capacity to produce high-end silicon. This will result in limited supplies of the Huawei Mate 40 smartphones, which may be the last to feature a Kirin chipset.

The Chinese government is planning a sweeping set of policies to develop its domestic semiconductor industry and counter these restrictions.

It will support “third-generation” semiconductors (which use gallium nitride, silicon carbide and other materials with wide bandgaps) through its fourteenth five-year plan, Bloomberg News reported.

The priority placed on building the semiconductor industry will be comparable to the vast effort placed on building its nuclear capacity, people with knowledge of the matter told Bloomberg News.

The plan will be presented to China’s top leaders in October as they meet to agree on the next five-year plan, which is expected to be heavily focused on technological innovation. President Xi Jinping has pledged an estimated $1.4tn over the next five years for investment in technology.

“The Chinese leadership realises that semiconductors underpin all advanced technologies and that it can no longer dependably rely on American supplies,” Dan Wang, an analyst at Gavekal Dragonomics, told Bloomberg. “In the face of stricter US restrictions on chip access, China’s response can only be to keep pushing its own industry to develop.”

Last week, it was reported that China had imported more than $300bn worth of integrated circuits for the third consecutive year, relying heavily on chip designs and manufacturing techniques from the US and US allies.

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