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Shenzhen announces new measures to support semiconductor companies

The central business district of the southern Chinese tech hub of Shenzhen has announced new measures to support semiconductor companies that range from cheaper rent to cash subsidies worth up to 10 million yuan (US$1.4 million), as part of the central government’s pursuit of technological self-sufficiency amid an escalating rivalry with the US.

Futian district, on the border of Hong Kong, is offering new semiconductor companies up to 60 per cent off market rental rates for government properties, according to a policy document released on Tuesday. For companies leasing from private landlords, the government can cover half of the rent or offer a subsidy of up to 8 million yuan per year for three years.

Cash aid under the plan covers multiple segments of the semiconductor supply chain, including chip design, testing and tape-out, the final result of the design process that means integrated circuits are ready for production.

One provision allows companies that achieve full mask tape-out for the first time to receive subsidies of 30 per cent or up to 10 million yuan of research and development costs related to the tape-out. It also offers 20 per cent or up to 2 million yuan for firms working on tape-out for multi-project wafer services, which allow designs from multiple customers to be produced on a single wafer.

Companies developing electronic design automation tools or other intellectual property (IP), such as designs that can be licensed to other firms, can receive a maximum of 5 million yuan in subsidies. Companies purchasing such materials are also eligible for subsidies covering 20 per cent of those costs or up to 3 million yuan.

Chip projects that the Shenzhen municipal government views as developing or supporting “core technology breakthroughs” are also eligible for up to 3 million yuan in subsidies.

The push to promote local semiconductor production is part of Futian’s new scheme supporting what the central government has identified as “strategic emerging industries”, which include biopharmaceuticals and information technology services.

Semiconductors have become a particular flashpoint, however, as Washington has steadily increased export restrictions on advanced chips and chip-making equipment.

In response to Beijing’s call to achieve self-sufficiency in the industry, local governments have doubled down on offering cash incentives and other types of policy support to develop home-grown semiconductors.

The Shenzhen municipal government previously announced policies to enhance the chip value chain with incentives that include subsidies of 10 million yuan a year for local chip design firms to acquire the necessary core IP for their research.

Nearby Guangzhou, capital of Guangdong province, has invested 200 billion yuan to help spur activity in semiconductors, renewable energy and other hi-tech fields.

About 40 major semiconductor projects are under construction or being planned in Guangdong, with combined investments worth more than 500 billion yuan, according to Guangdong Vice-Governor Wang Xi.

Technology is at the crux of geopolitical tensions between China and the US. Competition in semiconductors intensified after US President Joe Biden signed the Chips and Science Act into law last August, enabling Washington to dangle nearly US$53 billion in incentives to lure more chip manufacturing to the US.

In the past year alone, Washington has imposed a slew of new rules that restrict the flow of technology, talent and capital into China. These include adding Chinese chip makers like Yangtze Memory Technologies Co to a trade blacklist to prevent them from acquiring US chip design and manufacturing tools.

US firms like Nvidia, known for its industry-leading artificial intelligence chips, have also been forced to comply with increasingly stringent rules that prevent them from selling certain products to clients in China. South China Morning Post

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