Beijing plans massive investment to spur IC industry
May 23, 2014
China's State Council or cabinet has reportedly approved a fund that will be used to support the development of the integrated circuit (IC) industry in the country. The fund is likely to exceed market expectations to reach 600 billion yuan (US$96 billion). The Chinese government will invest in IC companies' stock rights to support their development, reports our Chinese-language sister paper Commercial Times.
Beijing municipality established a 30-billion-yuan (US$4.8 billion) fund at the end of last year to support the growth of the local IC industry. Wuhan, Shanghai and Shenzhen are said have followed in the capital's footstep and set up similar funds. Chinese financial news website ASStock's sources said other provinces and cities will follow, making the total fund set up for the IC industry up to 600 billion yuan in total. The Ministry of Industry and Information Technology will also create another fund worth billions of renminbi for the industry.
The policy support that the central government plans this year is the largest in the past decade and involves the upstream and downstream fields of semiconductor industries such as IC design, packaging, testing and related materials, according to the Chinese-language China Securities Journal.
The 600-billion-yuan fund could attract five to eight times that amount in social capital, bringing investment in the IC industry to 3-5 trillion yuan (US$480-$80 billion) in the next five to ten years. The funds will be managed by fund management companies and invested in IC companies through stock rights. They will withdraw after the industry becomes mature, sources said.
A source from China's IC industry said the scale of policy support for the sector is unprecedented. Unlike previous policies of tax exemption and subsidies, the funds will encourage the IC industries to be market-oriented. The policy will benefit major IC design and manufacturing companies such as SMIC, Spreadtrum and Huawei's subsidiary Hisilicon but smaller companies which are less competitive could face being bought out or going out of business.
The IC industry has grown rapidly in the country over the past few years and has been able to carry out vertical integration and fulfill orders on its own. Taiwanese IC companies still hold a technological advantage but their margins have been affected by the lower operating costs of their Chinese counterparts.
Source: WantChinaTimes.com
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