China-US chip battle heats up as Beijing prepares to spend $143B to boost manufacturing: report
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Beijing is reading a 1 trillion yuan ($143 billion) package to bolster its semiconductor manufacturing in a move to curb steps taken by the U.S. to cut reliance on China, a report by Reuters said Tuesday.
The package, which could be implemented as soon as the first quarter of 2023, would support China’s chip industry by providing incentives through subsides and tax credits, as well as by boosting research and production.
The news comes just one week after top Taiwanese electronics manufacturer Foxconn signaled it would be boosting its Hon Hai Technology India Mega Development Private Limited operation after a stock filling showed the tech giant invested $500 million into the plant.
Chinese President Xi Jinping is seen at the end of the Chinese Communist Party's 20th Party Congress on a giant screen a commercial district of Hangzhou in eastern China's Zhejiang province on Sunday, Oct 23, 2022. (Chinatopix via AP / AP Newsroom)
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The investment suggests that Foxconn could be expanding its chip making factories in India, where some project that Apple will look to house a top iPhone hub by 2025.
Reports earlier this month also suggested that Apple, which has long relied on manufacturing in China, would also be diversifying it production line by expanding its output in the South Asian market in countries like India and Vietnam.
U.S. lawmakers have encouraged American companies to cut ties with China in the wake of the COVID pandemic, when supply chain snafus, particularly in semiconductor production, drastically drove up prices of electronics ranging from toasters to cars.
The semiconductor shortages led to range of supply chain issues during the pandemic, and the subsequent months following, that affected American wallets and the greater U.S. economy.
Semiconductor chips are seen on a circuit board of a computer in this illustration picture taken Feb. 25, 2022. (Reuters/Florence Lo/Illustration / Reuters Photos)
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Though China's push to more heavily invest in the semiconductor industry shows Beijing is not ready to let that economic windfall slip away, the latest package is expected to be one of China's largest investments ever over a five-year period, the report said.
The package would largely assist companies by subsidizing the purchase of Chinese semiconductor equipment or plants.
Unnamed sources told Reuters that companies would be entitled to a 20% subsidy on the cost of purchase.
In a major push to cut U.S. reliance on overseas chip production, President Biden in August signed a $52.7 billion bill to fund U.S. semiconductor research and production through grants.
A researcher plants a semiconductor on an interface board during a research work to design and develop a semiconductor product at Tsinghua Unigroup research centre in Beijing, Feb. 29, 2016. (REUTERS/Kim Kyung-Hoon/File Photo / Reuters Photos)
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A tax credit for chip plants worth $24 billion was also included to incentivize U.S. companies to set up shop at home.
The U.S. has also looked to persuade its international allies to cut reliance on Chinese tech manufacturing.