Mainland China supports IC industry to build IC one-stop service

The Chinese mainland government is about to launch a RMB 600 billion silver bullet policy to support the local IC industry. This is the strongest policy in the past 10 years. The specific investment details are expected to be released in the second half of the year. However, market analysts believe that in addition to funds, the mainland's local IC industry must also face many obstacles such as talent and patents.

Last year, the National Development and Reform Commission of the mainland launched an antitrust investigation into Qualcomm, a major US communications chip manufacturer, and Inter Digital, a wireless technology patent manufacturer. This was seen as a concrete manifestation of the official intention to support local enterprises.

Sina quoted Wang Yanhui, Secretary General of the China Mobile Alliance, as saying that with the IC industry support fund, the IC industry, which lacks funds, will solve a major problem, but the problems in patents, talents, and management are difficult to improve immediately. He pointed out that mainland IC design companies have faced more and more international patent lawsuits in recent years. Only by breaking through these difficulties can the local IC industry have a chance to make a big leap forward.

Zhou Shenglei, deputy general manager of Beijing Ingenic Integrated Circuit Co., Ltd., believes that the launch of the IC industry support fund may be related to national security. Since Edward Snowden broke the news about the NSA, information security has received attention from senior Chinese government officials, and the IC industry has always been at the core of information security.

Since the end of last year, news has been circulating that China will set up an industry fund to support semiconductors (ICs). Yesterday (21), an authoritative source revealed that the State Council of China has approved the semiconductor industry support policy, and relevant documents have been issued to various departments. It is estimated that the total scale of the IC industry development fund will reach 600 billion yuan (the same below), far exceeding market expectations. The government will also support the development of IC companies in the form of equity investment.

According to a source quoted by Dazhihui Adax News Agency yesterday, provinces and cities in mainland China will use the integrated circuit (Taiwan called integrated circuit) industry development equity investment fund established by Beijing at the end of last year as a model to establish similar funds in various places to support the IC industry, using fiscal funds to attract social capital investment, so the total scale will reach 600 billion yuan. In addition, the Ministry of Industry and Information Technology will also establish another IC industry fund with a scale of several hundred billion yuan.

It is understood that Beijing established a 30 billion yuan IC industry support fund last year, and then Wuhan, Shanghai, Shenzhen and other places also reportedly followed Beijing's approach and formulated their own IC support funds.

China Securities Journal reported that the mainland government will launch a policy to support the local IC industry this year, which will be the largest in the past 10 years and will involve the entire semiconductor industry chain, from upstream IC design to downstream packaging and testing, as well as related materials. The market estimated the scale of the IC industry support fund to be 120 billion yuan.

Sources believe that the policy design target of 600 billion yuan will hopefully drive 5 to 8 times the social capital, and the funds invested in the IC industry will reach 3 trillion to 5 trillion yuan in the next 5 to 10 years. The IC Industry Development Fund will invite fund management companies to manage it, invest in the IC industry in the form of equity investment, and then exit when the companies mature.

Mainland IC industry insiders pointed out that the mainland government's support for the IC industry this time is unprecedented, and the support model is significantly different from the tax cuts and subsidies in the past State Council Document No. 4 and Document No. 18. This support fund will make the IC industry more market-oriented, which is good for larger manufacturing and IC design companies such as SMIC, Spreadtrum, and Huawei's HiSilicon Semiconductor, but smaller and less competitive companies may be acquired.

Industry insiders said that the mainland's local IC industry has developed rapidly in recent years and has the ability to integrate vertically and take orders independently. Although Taiwanese manufacturers still have advantages in technology, their profits have been affected. If the official financial injection of tens of billions of yuan is added, it may only be a matter of time before they catch up with the level of Taiwanese manufacturers.