China will ‘vigorously support’ semiconductor industry, IT ministry head says, as country seeks self-sufficiency in chip-making

The head of the Ministry of Industry and Information Technology said China’s semiconductor industry grew three times faster in 2020 than global peers
The minister also acknowledged geopolitical challenges and addressed a new law regulating rare earths, important elements for chips

Semiconductors

Coco Fengin Beijing

Published: 5:01pm, 1 Mar 2021

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The Chinese government will “vigorously support” its semiconductor industry, the head of China’s Ministry of Industry and Information Technology (MIIT) said on Monday, as the country pushes for self-sufficiency in chip-making amid a global shortage of components.

The semiconductor industry is “the cornerstone of the information society”, MIIT head Xiao Yaqing said at a press conference, and it will enjoy a “market-oriented and international business environment under the rule of law”.

Xiao showcased some achievements of the domestic semiconductor industry at the conference, but he warned that challenges remain. Industry revenue grew 20 per cent in 2020, three times faster than global peers, he said, while also calling for more international collaboration.

Semiconductors are at the forefront of the US-China tech war as the US has sought to curb access to its technology for creating advanced chips, accusing China of human rights abuses and intellectual property theft. China’s top chip maker Semiconductor Manufacturing International Corporation (SMIC) and telecoms giant Huawei Technologies Co, among several Chinese tech companies, have been added to the US Entity List, restricting access to chips made with US tech. The local car industry is now bearing the brunt of a global chip shortage, which Beijing has pledged to help address. Chinese carmakers rely on imports for more than 90 per cent of semiconductor components.

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The situation may not improve under US President Joe Biden’s administration. The US is in preliminary conversations to form alliances to stay ahead of China in cutting-edge technologies, including semiconductors and artificial intelligence, according to a report from The Wall Street Journal on Sunday

Beijing is already using industrial policies such as tax cuts and subsidies in a push to reduce the country’s dependence on chip imports, but experts believe the industry could be as much as a decade behind in chip manufacturing. Minister of Science and Technology Wang Zhigang said on Friday that advanced chips and related software would be a priority in research and development.

The MIIT also highlighted China’s gains in manufacturing, 5G growth and new regulations regarding rare earths, important metals in the production of chips.

China remains the world’s top manufacturer for the 11th year in a row, making up 30 per cent of the global market, Xiao said. The value added of China’s manufacturing industry rose 33 per cent in 2020 to 31.3 trillion yuan (US$4.8 trillion), he added.

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Xiao said China, which had more than 718,000 5G stations by the end of 2020, is “pushing forward with 5G network construction in a well-organised manner”, while “accelerating the planning of a 6G network”.

He also said China will ease restrictions on foreign capital in the domestic telecoms industry.

In January, Beijing drafted a new law on rare earths, which is expected to be implemented as early as this year. The law prohibits the purchase and sale of rare-earth products that are determined to have been exploited and extracted illegally, giving Beijing more control over the supply of such materials. Rare earths have become vital elements for the development of major economies.

China is the top exporter of rare earths, accounting for 60 per cent of global output. Exports dropped to a five-year low in 2020, however, amid the Covid-19 pandemic and a push from the US, Europe and Australia to reduce the dependence on China.

Xiao said that the goal of the new law is to aid the “healthy and sustainable” development of the industry while solving problems such as environmental degradation and pricing, which he called too low because of “vicious competition”.

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