Beijing plans record incentives to strengthen semiconductor sector

China is considering a package of incentives worth as much as $70 billion to bolster its domestic semiconductor industry, reflecting Beijing’s determination to reduce reliance on foreign chipmakers amid ongoing technological competition with the United States.

Officials are reportedly evaluating proposals to allocate between 200 billion yuan ($28 billion) and 500 billion yuan in subsidies and other financial support, according to sources familiar with the discussions who requested anonymity due to the confidential nature of the talks. Details regarding the final structure, amounts, and targeted companies are still being finalized, Bloomberg reports.

The scale of the proposed effort—approaching the funding level of Washington’s Chips Act at its lower end—underscores China’s commitment to supporting firms such as Huawei Technologies Co. and Cambricon Technologies Corp., even after the Trump administration allowed the sale of advanced Nvidia chips, including the H200, into the country. At its maximum, the program could become the largest state-backed semiconductor incentive scheme ever conceived, coinciding with global initiatives in Europe and the Middle East to secure local production of chips critical to AI and national security.

The planned program will operate independently of existing initiatives such as the $50 billion Big Fund III equity-investment vehicle, which is also overseen by the Ministry of Industry and Information Technology (MIIT). MIIT representatives did not respond to requests for comment.

President Xi Jinping has emphasized a “whole-nation” approach to develop semiconductor capabilities, mobilizing the country’s full resources to counter uncertainties in access to US technology. Export restrictions imposed by three consecutive US administrations, starting with Donald Trump, have heightened Beijing’s sense of urgency.

China’s push is already evident across the sector. Semiconductor Manufacturing International Corp. (SMIC) is steadily expanding its production capabilities as Huawei’s key partner, despite lacking the advanced equipment needed for cutting-edge chips. AI accelerator designer Moore Threads Technology Co. has seen its shares surge more than 600% since its Shanghai debut.

Authorities have also encouraged firms to prioritize domestic components, steering local agencies away from Nvidia’s H20 chip, which was specifically customized for China under US export controls. Nvidia executives have acknowledged that their share of China’s AI chip market has effectively dropped to zero, and Beijing has yet to publicly approve imports of Nvidia’s more advanced H200 products despite recent US policy adjustments.

Nevertheless, China’s semiconductor technology remains roughly six years behind the leading-edge processes controlled by Taiwan Semiconductor Manufacturing Co., the primary supplier for Nvidia and Advanced Micro Devices Inc.

By Vafa Guliyeva