This is a significant turn in China’s technology war with the US, a competition that has led America to limit Chinese access to certain advanced technology products in recent months
The Chinese government has decided to suspend subsidies to the chip industry to improve China’s chances of producing chips capable of competing with American production, according to Bloomberg. The shutdown is partly a response to subsidies that failed to produce the desired results, as well as to the economic crisis created by China’s fight against Corona.
Leaders in China have discussed alternative ways to help domestic chipmakers, including by lowering component costs. This is a significant turn in China’s technology war with the US, a competition that has led America to limit Chinese access to certain advanced technology products in recent months.
China has invested tens of billions in the last decade in the chip industry, and it has also developed the National Investment Fund for the Integrated Circuit Industry, a government investment fund to expand semiconductor manufacturing capabilities in China. The NICIIF has been used by China to help several Chinese chipmakers, such as SMIC and memory maker Yangtze Memory Technologies, develop their manufacturing capabilities. The companies are now subject to export controls implemented by the Biden administration to limit their access to military-grade chips.
Chinese President Xi Jinping has been demanding that Chinese manufacturers keep up with American innovation due to the restrictions, but has been frustrated by their inability to keep up.
Production was also severely affected by China’s zero-coronavirus policy, which slowed production and limited access to products due to the country’s strictly enforced isolation policy.
The US’s efforts to compete with China have been the focus of legislation in the past year. The chip law, approved last summer, provided tens of billions of dollars to manufacturers to expand their domestic factories. The law has already led to additional factories in Ohio, New York and Arizona. Manufacturers also reported a decline in semiconductor sales, leading to a surplus of memory and storage chips.