Demand for IC chips manufactured by Chinese companies is on the rise and already hit a record high at the beginning of last year. Demand has been “far more than what was expected”, according to Dou Qiang, President of Tianjin Phytium Information Technology, a Chinese manufacturer of server chips. The Chinese government has intensified efforts to develop chips domestically so as to reduce reliance on the foreign semiconductor industry. That move toward self-reliance comes amid Sino-U.S. trade frictions, which drove capital into the domestic chip industry. Last year, investors poured more than CNY200 billion in the industry – much higher than the approximately CNY70 billion in 2019. The annual tone-setting Central Economic Work Conference in December highlighted the importance of “technological innovations” to solve major problems that restrict the nation’s economic development. The conference said China will ensure better implementation of key  projects targeting breakthroughs in key technologies and solutions to bottleneck problems while encouraging businesses to focus on their areas of strength and forge new cutting-edge technologies. 

Zhang Yansheng, Chief Researcher of the China Center for International Economic Exchanges, said that starting this year, China will take developing its own technology as a fundamental guiding principle. Jia Kang, Chief Economist of the China Academy of New Supply-Side Economics, said that another focus of the conference was  “bottleneck problems”, which refers to technologies at the forefront of innovation and futuristic vision, such as high-end  chips. 

China has also introduced tax incentives for chip manufacturers. Qualifying IC companies or projects that have been in operation for more than 15 years and that make 28-nanometer or smaller-scale advanced chips will be exempt from corporate income taxes for up to 10 years. Companies producing 65-nanometer to 28-nanometer chips will get five years of tax exemption and a 50% discount on the corporate tax rate for the subsequent five years. The tax incentives are expected to boost the competitiveness of the nation’s semiconductor industry on the global stage. Chinese technology companies will increasingly turn to domestic chip manufacturers. In May last year, the U.S. started requiring contract chip producers anywhere in the world that use U.S. semiconductor equipment and technology to obtain approval before producing chips designed by Huawei’s subsidiary HiSilicon.

Data from the China Semiconductor Industry Association’s IC Design Branch show that the total sales volume of China’s IC design industry is expected to grow about 24% year-on-year to reach nearly CNY382 billion by the end of 2020, accounting for nearly 13% of the total sales revenue in the global IC design market. Full-year industry data for 2020 are yet to be compiled and confirmed. China’s top chipmaker SMIC saw its revenue rise by nearly 33% on a yearly basis to a record USD1.08 billion during the third quarter of last year, after debuting on the technology-focused STAR Market of the Shanghai Stock Exchange in July. Founded in 2000, SMIC has successfully mass-produced a smartphone processor for Huawei Technologies with its 14-nanometer manufacturing process, marking a breakthrough in China’s efforts to boost its chip-making industry, the China Daily reports.