China reportedly considering tremendously large chip support package
Beijing is reportedly weighing a massive new support package for the semiconductor industry.
On December 12, Bloomberg reported that, according to its sources, officials are considering a range of financial support measures totaling RMB 200-500 billion (approximately USD 70 billion).
- At the upper end, this would be the largest state-backed semiconductor funding program ever – well above the USD 39 billion in subsidies set aside under the US CHIPS Act.
The initiative would reportedly operate independently of existing state funding schemes, such as the Big Fund – China's biggest semiconductor fund.
- The fund’s third iteration, which kicked off in 2024, raised RMB 344 billion.
Other than that, details are thin: It is not yet clear which types of projects the fund would prioritize, or which funding mechanisms it would use.
Get smart: The 15th Five-Year Plan blueprint called for “extraordinary measures” to achieve technological breakthroughs across critical fields, with semiconductors at the top of the list.
- So the rumored package is likely legit.
Our take: China is already awash with money for the chip supply chain. We think this package will take a different tack and focus on subsidizing local substitution.
- For chip companies, this means subsidizing the operational losses and "yield tax" incurred by running unproven domestic equipment in place of mature Western tools.
- For buyers, it means subsidizing the steep engineering costs and performance risks of migrating away from entrenched foreign ecosystems to local alternatives.
Our other take: A well-funded program like this could be a game-changer.