Source: The Economist

China wants to become a superpower in semiconductors, and plans to spend colossal sums to achieve this

THE Chinese government has been trying, on and off, since the 1970s to build an indigenous semiconductor industry. But its ambitions have never been as high, nor its budgets so big, as they are now. In an earlier big push, in the second half of the 1990s, the government spent less than $1 billion, reckons Morgan Stanley, an American bank. This time, under a grand plan announced in 2014, the government will muster $100 billion-$150 billion in public and private funds.

The aim is to catch up technologically with the world’s leading firms by 2030, in the design, fabrication and packaging of chips of all types, so as to cease being dependent on foreign supplies. In 2015 the government added a further target: within ten years it wants to be producing 70% of the chips consumed by Chinese industry.

It has a long way to go. Last year China’s manufacturers, both domestic and foreign-owned, consumed $145 billion-worth of microchips of all kinds (see chart). But the output of China’s domestic chip industry was only one-tenth of that value. And in some types of high-value semiconductor—the processor chips that are the brains of computers, and the rugged and durable chips that are embedded in cars—virtually all of China’s consumption is imported.

To help them achieve their dream, the authorities realise that they must buy as much foreign expertise as they can lay their hands on. In recent months, state-owned firms and various arms of government have been rushing to buy, invest in or do deals with overseas microchip firms. On January 17th the south-western province of Guizhou announced a joint venture with Qualcomm, an American chip designer, to invest around $280m in setting up a new maker of specialist chips for servers.

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