China cuts taxes to spur semiconductor expansion

Taipei Times

March 30, 2021

China yesterday announced tax breaks to spur growth of its semiconductor industry following US sanctions that alarmed the Chinese Communist Party by cutting off access to US processor chips for tech giant Huawei Technologies Co (華為) and some other companies.

Leaders declared accelerating efforts to transform China into a self-reliant “technology power” to be this year’s top economic priority after the tariff dispute with Washington highlighted its reliance on US components for smartphones and other industries Beijing wants to develop.

Chipmakers can import machinery and raw materials tax-free through 2030, the Chinese ministry of Finance and other agencies announced.

It did not say how large a subsidy to manufacturers that might represent.

Beijing has spent heavily over the past two decades to build up a Chinese chip industry, but its makers of smartphones and other technology still rely on Taiwan, Europe and the US for their most advanced components.

Then-US president Donald Trump cut off Huawei’s access to US 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 the firm’s smartphone business, which was the No. 1 global seller early last year, but has dropped out of the top five brands.

Political analysts expect little change in position under US President Joe Biden.

Huawei founder and chief executive officer Ren Zhengfei (任正非) said in February that it is “very unlikely” sanctions will be lifted.

Processor chips and other semiconductors are China’s biggest single import, totaling more than US$300 billion a year.

Under the latest measure, machinery and raw materials “that cannot be produced or whose performance cannot meet demand” would be exempt from import tax, the government said.

That applies to photoresists, masks, polishing pads and liquids, silicon crystals and wafers, materials to build clean rooms and other production equipment, it said.