All China’s steps towards technological self-sufficiency
China is working on a $143 billion package to prop up its semiconductor industry and achieve self-sufficiency. Carlo Palleschi's article for CeSI
In the context of growing geopolitical tension between Beijing and Washington, exacerbated by the effects of the war in Ukraine, the technology sector is once again at the center of the clash between the two sides of the Pacific. In fact, China is reportedly working on a package worth 143 billion dollars to support its semiconductor industry . The ultimate goal is to ensure technological self-sufficiency at all stages of the supply chain, from design to production.
According to reports, it would be a five-year plan, consisting mainly of subsidies and tax credits for the research and production of semiconductors . The beneficiaries are expected to be both state-owned and private enterprises, especially large semiconductor equipment companies such as NAURA Technology Group, Advanced Micro-Fabrication Equipment Inc China or Kingsemi.
THE ANSWER TO THE UNITED STATES
Beijing's hypothesis of implementing this huge support plan is a direct response to the decision of the United States and other countries linked to Washington to increase restrictions in the semiconductor sector. Indeed, in October, the Biden administration adopted a new plan to restrict sales of advanced semiconductor technologies to China, with the aim of preventing Beijing from accessing US capacity, machinery and components. In particular, US companies will therefore not be able to export critical tools for chip production to Chinese groups. Added to this is the bipartisan bill (the CHIPS and Science Act of 2022) signed by President Biden in August 2022 which allocates $52.7 billion in subsidies for US semiconductor research and production. The goal is to accelerate the reshoring of US companies and increase the competitiveness of the entire sector in the face of Chinese dynamism in science and technology.
THE CONTRIBUTION OF JAPAN AND THE NETHERLANDS TO THE US PLAN
It is significant to note how the United States has managed to attract other countries to this strategy as well. In fact, it seems that both Holland and Japan are willing to comply with Washington's decisions and to adopt similar restrictions on China. If confirmed, it would be an explicit move to strengthen the network of alliances to counter Chinese technological capacity, which would significantly impact Beijing. Indeed, Holland and Japan are, together with the United States, the main exporters of know-how and technologies to manufacture the most advanced microchips. From this point of view, there is therefore a substantial continuity between the Trump and Biden administrations, both having identified the maintenance of primacy status in the semiconductor sector as a fundamental lever for competition with Beijing. Trump, for example, had adopted restrictions on various Chinese companies, including the giant Semiconductor Manufacturing International Corporation (SMIC). Biden has decided to expand the blacklist of companies to which the export of chips is prohibited, by including other Chinese companies active in the hi-tech sector, and it seems that 31 other Chinese companies may soon be added as well.
WHY CHINA WORKS TO SELF-SUFFICIENCY
In this context, therefore, the rationale for the 143 billion dollar package that Beijing is allegedly working on appears clear. It is a further step towards strengthening the so-called "decoupling" in critical sectors, ie the process of decoupling between the Chinese and US economies. In fact, Beijing, despite being the market leader in the processing of rare earths which are fundamental for all electronic products, is instead a net importer of semiconductors for about 350 billion dollars in 2020 and 304 billion dollars in 2019.
In this scenario, therefore, it is more than ever essential for Beijing to increase its capabilities in the design and production of integrated components, in order to achieve scientific and technological autonomy, and to disengage from the United States.
THE “MADE IN CHINA 2025” PLAN
It is, therefore, in this context that the "Made in China 2025" strategic plan must be inserted and interpreted which, among the various objectives, sets itself that of satisfying 70% of the domestic need for microchips endogenously within 3 years . Although it is unlikely that China will actually reach this goal, the path traced by political planning is clear and aims, in a strategic way, to achieve scientific and technological autonomy as a driver of growth and projection for global leadership.
THE TAIWAN QUESTION
In the face of this scenario of technological competition, the question of Taiwan therefore assumes greater importance, which includes, in addition to the military and ideological aspect, also a more pragmatic aspect. Taiwanese companies make up 63% of the global semiconductor market and the giant Taiwan Semiconductor Manufacturing Company (TSMC) alone accounts for 54%. The Communist Party of China, therefore, looks to Taiwan as a fundamental step to free itself from the United States and try to reduce its technological vulnerabilities.
SELF-SUFFICIENCY IS THE PRIORITY FOR XI CHINA
Achieving technological self-sufficiency is a priority for Beijing, as President Xi Jinping made clear at the Communist Party Congress in October. During his third term, Xi Jinping aims to continue to build an increasingly self-sufficient economy, especially in the technology and food security sectors, foster decoupling with the United States in critical sectors and promote growth driven by more domestic demand than from exports. In this context, technological self-sufficiency is one of the cornerstones of China's long-term vision.
On the other hand, this approach had also clearly emerged in the plenary meetings known as "Two Sessions" of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference, which took place in March 2022 and which light as the investment decisions had to be strongly directed to increase the resilience of the food and technology sectors, in particular as regards the production of chips.
This 143 billion investment plan, if made official, therefore does not come as a surprise, but fits coherently into China's long-term strategy, demonstrating once again how the race for global leadership also passes, and above all, through domination of the technology sector.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/cina-autosufficienza-tecnologica/ on Sun, 08 Jan 2023 06:13:24 +0000.