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Thursday, May 23, 2024

China aims to kick Intel and AMD out of the semiconductor market

Beijing is trying to reduce the country’s reliance on semiconductor imports worth about $200 billion annually.

China is planning a $29 billion (204bn yuan) injection of cash to ease its overwhelming dependence on major US semiconductor companies, such as Intel and AMD. In an effort to bolster its domestic semiconductor manufacturing and soothe its national security woes, the Chinese government is creating the state-backed fund to invest in all stages of chip production – from design to fabs.

China is the biggest importer of semiconductor chips 

China is the world’s biggest chip importer, and the long-awaited 204 billion yuan ($28.9 billion) fund will fuel Beijing’s efforts to forge its own semiconductor supply chain from chip design to manufacturing. It will play a key role in steering overall strategy and investment in the integrated circuit sector, which includes processors and storage chips used in smartphones and data centers.

Read more: Xi vows to expand China economy as US trade war continues

Beijing’s effort to reduce its reliance on American chips is taking on greater urgency as the Trump administration adds more Chinese names to its export blacklist, cutting off the flow of chips to targeted companies from Huawei Technologies Co. to SenseTime Group Ltd.

Initiative should be seen in context of the US-China trade war

Beijing is trying to reduce the country’s reliance on semiconductor imports worth about $200 billion annually. It fears such dependence undermines national security and hampers the development of a thriving technology sector.

The country envisions spending hundreds of billions of dollars to achieve a prominent position in the semiconductor industry — something U.S. tech executives and government officials have warned could harm American interests.

Read more: US-China trade war nearing its end: New Year’s miracle for the global economy

The newly-raised capital comes largely from the state directly, with the Ministry of Finance and the China Development Bank injecting billions of yuan. Major state-owned industry leaders and local governments are also said to have invested into the new semiconductor pool.

The growing want for domestic production in China will eventually pressure US companies in the state. Intel and AMD are both market leaders in x86 processors whose position in the Chinese market could one day be in jeopardy.

Intel’s CEO, Bob Swan, was hesitant to talk specifics during the company’s Q3 investors call, but for just that one quarter’s $1.2bn revenue overshoot, China accounted for some $200m.