In a bid to circumvent US sanctions, China on Monday announced tax breaks to spur growth of its semiconductor industry. According to China’s finance ministry, chipmakers will be allowed to import machinery and raw materials tax-free through 2030. However, there was no clarity on how large the subsidy will be.
Over the past two decades, Beijing has spent heavily to build up a Chinese chip industry. However, Chinese manufacturers still rely on the US, Europe and Taiwan for their most advanced components. What precipitated matters was former US president Donald Trump’s decision to cut off Huawei Technologies Ltd.’s access to American processor chips and other technology in 2019 in a fight over Beijing’s industrial ambitions.
Last year, Trump tightened curbs by prohibiting global suppliers from using US technology to make chips for Huawei. That threatens to cripple its smartphone business, which was the No. 1 global seller in early 2020 but has dropped out of the top five brands.
Political analysts expect little change in the US position under President Joe Biden, who succeeded Trump in January. Huawei founder Ren Zhengfei said in February it is ‘very unlikely’ sanctions will be lifted.
Processor chips and other semiconductors are China’s biggest single import, totalling more than $300 billion a year.
Under the latest measure, machinery and raw materials ‘that cannot be produced or whose performance cannot meet demand’ will be exempt from import tax. That applies to photoresists, masks, polishing pads and liquids, silicon crystals and wafers, materials to build clean rooms and other production equipment, according to the announcement.
Under the latest measure, machinery and raw materials ‘that cannot be produced or whose performance cannot meet demand’ will be exempt from import tax, the government said