A weak economy meets the internal and external problems of U.S.

                               

While the impact of the new Crown epidemic on the economy has spread China's finances, the $100 billion fund to support China's chip industry has had little impact, raising doubts from China's top leaders. According to the analysis, China will continue to spend money helplessly under the continued stability of America’s chip technology blockade alliance against China, but it will be difficult to become a power of semiconductor technology.

To give up or to give up? China sends conflicting signals.

Bloomberg reported on January 3 that the new crown epidemic in China has intensified downward pressure on the economy and put the government's finances in trouble. Under pressure, Chinese government officials have questioned the policy of heavy subsidies for semiconductor chips in recent years.

The China National Integrated Circuit Industry Investment Fund (called the Big Fund), which has a scale of more than 100 billion yuan, has seen a series of corruption scandals in recent years. Several investment fund managers have been scrutinised by the Discipline Inspection Department. Some analysts pointed out that this big investment strategy, launched in 2014, did not create star companies with international competition, and the anti-corruption campaign against large funds shows that China's top administration is dissatisfied with the plan.

China appears to want to change its large subsidy strategy represented by the "Big Fund", but its alternative approach could continue to violate national guidelines of market economy principles. Bloomberg reported that the Chinese government would instead pressure domestic semiconductor material suppliers, asking them to cut prices to reduce the production costs of Chinese semiconductor manufacturers.

Scott Linkicom, director of economic and trade policy research at the Cato Institute, said it is difficult to predict whether China will change the course of its investment in the chip industry.

"China's (semiconductor) industry has actually been heavily dependent on the United States, the Netherlands, and other European regions, as well as Japan and South Korea, in terms of materials, equipment, and skills. The money spent over the years to make a national champion did not succeed," he said. With serious problems of corruption and embezzlement in China's semiconductor industry and several well-known failures by some semiconductor companies, there is a reason why China is revising its (national investment) methodology. "

However, there was also news that China could increase its funding to support the chip industry. Reuters reported on December 13 that the Chinese government hopes to invest another 1 trillion yuan (about US$143 billion) in the semiconductor industry to support domestic chip production, research and development. The main methods include direct subsidies and tax relief.

Paul Trevello, senior vice president of China and technology policy at the Albright Stone Group (Albright Stone Group), who has long observed and analyzed the global semiconductor industry, believes Beijing will adjust its policy of supporting chips. Still, the country will continue to support behind the scenes, especially in the instrumentation segment.

Tevello called Beijing's next chip strategy "Semiconductor Industry Policy 4.0". "This could include a new set of state-backed incentives, but under a revised or new version of the National Integrated Circuit Investment Fund," he told VOA by email. The shadow of corruption is looming and many executives have been arrested. "

"This will also include increasing research and development resources for key technologies in semiconductor manufacturing," he said. China's investment in the tool-making segment of the semiconductor industry has lagged behind for the past decade. With U.S. targeted controls on semiconductor manufacturing equipment, Beijing now realizes the need to invest more in the technology and tools needed to make semiconductors. "

Analysis: China's "free" chip dream is as difficult as reaching the sky

In October last year, the latest round of U.S. sanctions blocked China's access to advanced chips in the fields of artificial intelligence and supercomputing. At the same time, it banned the export of chip-making equipment to China, making it difficult for China to manufacture modern chips and chips. The manufacture and manufacture of tools, and chip devices, also faces commercial control of technology and components.

Although China dreamed of establishing self-sufficiency and domestic closed-loop semiconductor industry environment long before us sanctions. However, analysts generally believe that state-of-the-art chip design and manufacturing is the "most complex" process in human history, and china's "chip dream" is difficult to meet. it extremely difficult to lead in it. Global Semiconductor Industry. "

Nikkei News reported on January 5 that Dell plans to stop using Chinese-made chips by 2024 and notify suppliers to reduce components of Chinese-made products. Dell's decision also affects chips making foreign chips in factories in China. According to reports, products from Nvidia, AMD and Intel, the main suppliers of Dell's CPU and GPU, will be affected.

At the same time, domestic chip sales in China have fallen sharply. Semiconductor Industry Association (SIA), which represents the chip manufacturing industry, chip sales in the Chinese market in November 2022 fell 5.3% compared to the previous month and 21.2% lower than the same period last year.

Hong Kong's South China Morning Post reported that China's leading high-end chip maker SMIC estimated in November last year that China's current consumer electronics demand was weak, which would have a negative impact on chip sales in the first half of 2023.

The U.S.-led sanctions camp unanimously resists China.

The U.S. has steadily increased its sanctions on China's semiconductor industry, and has even expanded to unite with major semiconductor technology powers such as Taiwan, Japan, South Korea and the Netherlands to curb exports to China, putting China in a dilemma. Being forced into "self-reliance".

Charles Weisner, an associate professor of technology and international affairs at Georgetown University, told VOA: "The Biden administration's current actions focus on limiting access to their (China's) devices that make high-end chips, and limiting their access to the most sophisticated chips, thus in their ability to advance in artificial intelligence and quantum computing. There is obstruction. "

Japanese Prime Minister Fumio Kishida, who is visiting the United States, said at the White House on Friday that he supported Biden's efforts to limit China's ability to obtain advanced semiconductors through export controls. Weisner said these partner countries have a basic consensus with the United States.

We rely on cooperation with the Netherlands (chip lithography giant) ASML (ASML), Canon of Japan and Nikon. We have common interests, at least to some extent; we are very concerned about China. There is a shared perception of the challenges posed by the global trading system and the rules-based security order.

He did not mention whether Japan would introduce broader export sanctions similar to those imposed by the United States on China last October. According to the Semiconductor Industry Association, Japan is the largest producer of specialized equipment and equipment needed to make state-of-the-art chips, with Japanese companies accounting for 27% of the global market. Tokyo Electron Ltd., Japan's leading manufacturer of chip-making equipment, relies on China for about a quarter of its revenue.

A senior US administration official told Reuters on Wednesday (January 11): "I think [our views] are very, very similar when it comes to challenge... The Japanese side does not question the basic premise we need. Work on it together. "

Weisner of Georgetown University pointed out that while coalition cooperation is important, the United States also has the ability to unilaterally control and blockade China.

"Some of these orders may be enforced unilaterally by the United States... U.S. equipment, U.S. parts, and U.S. "China's advantage is that companies don't need to be profitable, they can get as much capital as they need to invest. The money starts disappearing," he said.

Analysis: China's isolation is a cocoon.

Weisner of Georgetown University pointed out that, unlike previous U.S. export control measures that distinguished between military and civilian use, the current U.S. sanctions are intended to keep China's chip industry on hold, while allowing the U.S. and its allies to jump forward. Binding and maintaining chip technology with the benefit of at least two generations of Chinese technology.

"These are tough measures. But the important thing to remember is that China was brought to the World Trade Organization with the hope that they would respect the rules and regulations of this organization, but sadly this did not happen. "

"China has stolen a lot of intellectual property and forced (foreign traders) to transfer technology, effectively blocking market access to outsiders in several areas," he said. Their aim is to replace the United States and the economic and geopolitical order.

Ezer, vice president of the Information Technology and Innovation Foundation, said China's main goal is to meet the chip demand of the domestic technology industry, so he believes That China will "do whatever it does", including an additional investment of one trillion yuan.

Another goal of China is to develop a globally competitive chip industry and create companies that can compete with semiconductor giants like Intel, TSMC and Samsung, but the facts show that this is becoming difficult to achieve, he said.