As Beijing steps up efforts to lessen its reliance on foreign technology, officials familiar with the situation said this week that China is exploring a semiconductor incentive package worth up to $70 billion. This might become the largest state-backed chip program in the world.
According to Bloomberg, the planned package would cost between 200 billion yuan ($28 billion) and 500 billion yuan. The precise sums and target companies are still being discussed. The program would compete with the $39 billion in direct subsidies provided by the U.S. CHIPS Act, even at the lower end of the spectrum.
China is considering investing $70 billion in local chip manufacturing, which would be the biggest government investment in semiconductors. Huawei and Cambricon are two potential possibilities to compete with Nvidia and other American companies.
Growing Competition In Technology
The incentives would function independently of China’s current Big Fund III, an equity investment vehicle worth $47.5 billion that was founded in May 2024 and has already started providing funding to companies that manufacture semiconductor equipment. According to people familiar with the plans, Bloomberg was informed that the additional cash would target homegrown champions such as Moore Threads, Cambricon Technologies, Semiconductor Manufacturing International Corporation, and Huawei.
The news coincides with a change in U.S. policy regarding chip exports. On December 8, President Donald Trump gave his approval for Nvidia’s H200 chips to be sold to China on a revenue-sharing basis, with the U.S. government receiving 25% of the sales. Despite being a generation behind Nvidia’s most recent Blackwell chips, the H200 marks a substantial relaxation of export restrictions imposed due to national security considerations.
However, despite allegedly adding local AI chips from Huawei and Cambricon to government procurement lists for the first time, Chinese officials have not yet publicly approved imports of the H200.
The Prolonged Journey To Self-Sufficiency
A “whole-nation” approach to semiconductor development has been pledged by President Xi Jinping, who aims for 70% self-sufficiency by 2025. Although recent developments indicate growth, current projections indicate China will only achieve roughly 30–40% by the end of the year. Using an advanced 7-nanometer technology, Huawei and SMIC have created China’s most advanced domestic chip to date, according to a report released Thursday by research firm TechInsights.
China still lags several generations behind industry leader Taiwan Semiconductor Manufacturing Company, which has started producing 3-nanometer circuits and is getting ready for 2-nanometer technology, despite significant investments totaling more than $150 billion since 2014. Domestic chipmakers also struggle with yield; TSMC’s more sophisticated nodes get 60% useable output, while Cambricon’s sophisticated chips only achieve 20%.