Sheng said most Chinese semiconductor foundries generate most of their revenue from products at 55 nanometre and above so the favourable policies will be of more direct help to the established operations like Semiconductor Manufacturing International Corporation (SMIC) and Shanghai-based Huahong, the only two foundries that can produce chips using the 28nm processing node.
The current state-of-the-art 7nm process, capable of packing 6.9 billion transistors onto a smartphone processor chip, can only be made by overseas foundries such as TSMC and Samsung Electronics. US chip giant Intel last month announced that its own 7nm process was about 12 months late.
Semiconductors are the backbone technology of the information age. These tiny electronic devices, usually smaller than a postage stamp, power the modern economy by acting as data-processing brains for products from smartphones to cars and spacecraft.
China lags the US in advanced semiconductor technologies, including chip design and manufacturing. Amid a protracted tech war that is expanding from 5G and chips to the internet, Beijing has doubled down on efforts to channel more funds and state support into the vital sector in the hopes of narrowing the gap between the two countries.
Last Friday SMIC announced plans to build a US$7.6 billion foundry in Beijing, focusing on the 28nm process and more advanced nodes, with the aim of producing about 100,000 12-inch wafers per month.
In 2014, the central government set up the China National Integrated Circuit Industry Investment Fund with the goal of helping the country become more self-sufficient in making the chips used by the country’s vast manufacturing supply chain. The fund raised 138.7 billion yuan (US$21.8 billion) in its first financing round in 2014, and completed the second round of US$29 billion last year.
“These tax incentives are relatively higher than those [given] to ordinary manufacturing industries,” said Martin Ngai, EY Greater China TMT tax leader. “It shows the Chinese government is willing to support the growth in high-tech industries such as semiconductors and software.”