China considers incentive package to bolster semiconductor sector

Officials are discussing a bundle of subsidies and financing support in a range of roughly 200 billion to 500 billion yuan (about $28 billion to $70 billion). The exact size, structure and target list of companies have not been finalized, and the proposals are still being debated inside the government.

The draft package would channel more state money into the factories, equipment and supply chains that underpin China’s chip sector, which Beijing has designated as a strategic priority for economic security and military and AI development. Semiconductors are at the center of a broader US–China tech rivalry, with Washington tightening export controls on advanced chips and manufacturing tools while Beijing responds with subsidies and domestic-procurement drives.

Aforementioned incentives are expected to combine direct subsidies with other forms of financial support rather than a single new state fund. The goal is to accelerate investment in critical areas of chip production and design, reduce reliance on imported technology, and help local manufacturers cope with rising capital costs.

The discussions come on top of existing support channels, including a 500 billion yuan re-lending program announced by China’s central bank to back science and technology sectors, and successive phases of the China Integrated Circuit Industry Investment Fund, the so-called “Big Fund,” which has raised tens of billions of dollars since 2014 to invest in domestic semiconductor firms.

Chip-focused prospective package follows a series of recent policy steps aimed at strengthening China’s chip ecosystem. This week, Beijing added domestic AI processors from companies such as Huawei and Cambricon to an official government procurement list for the first time, opening the door to larger state demand for homegrown accelerators in public agencies and state enterprises.

At the same time, Chinese GPU designer Moore Threads — sometimes dubbed one of the country’s “little Nvidias” – made a high-profile debut on Shanghai’s STAR Market, raising more than $1 billion and seeing its shares soar over 400% on the first day of trading. The listing underscored investor appetite for local chip champions as Beijing encourages domestic alternatives to US suppliers.

Together, these measures underline a dual strategy: using public money and state procurement to create demand for Chinese chips, while improving access to financing for companies that can fill gaps left by US export controls on advanced processors and tools. The contemplated 200–500 billion yuan incentive package would add another layer of support on top of those initiatives.

The talks in Beijing come as other chip-producing nations roll out their own subsidy programs. The US CHIPS and Science Act, the European Chips Act and new support schemes in South Korea and Japan are all channeling public money into semiconductor fabrication, research and packaging, intensifying competition for investment and manufacturing capacity.

China’s contemplated incentives are meant to ensure that domestic firms are not left at a disadvantage in this global subsidy race and that key projects – from advanced logic and memory to power devices and AI accelerators – can secure funding even in a weaker macroeconomic environment. Officials involved in the discussions described the proposals as part of a long-term strategy rather than a short-term stimulus plan.

Beijing has been investing in semiconductors for more than a decade, but US export controls since 2019 – and tightened again in 2022 and 2023 – have sharpened the focus on self-reliance. The “Big Fund” has financed national champions such as foundry operator SMIC and memory maker YMTC, while local governments have set up their own investment vehicles and industrial parks dedicated to chips.

If approved near the upper end of the mooted range, the new 200–500 billion yuan package would rank among China’s largest single waves of support for its chip sector, underlining how central semiconductors have become to both its industrial strategy and its response to ongoing US technology restrictions.

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