China incentivises local chip development

12 August 2020

The Chinese government aims to incentivise firms to develop chips in the country as part of plans to “build a globally competitive semiconductor sector”.

China's State Council announced policies, including tax breaks and financial support, to facilitate the growth of the integrated circuit and software sectors, according to state news agency China Daily.

It added chip companies of all ownership types, including foreign enterprises, that set up in China can benefit from the new incentives. 

As the world’s largest semiconductor sector, China spent $305.6bn on chip imports in 2019, but this has declined 2.1% year-on-year due to the growth of domestic suppliers. 

China produced more than 100bn chips produced in the first half of 2020, showing a 16.4% year-on-year increase, according to industry regulator Ministry of Industry and Information Technology.

Wang Peng, deputy head of the China Center for Information Industry Development, said: “It showcases the government's desire to build a globally competitive semiconductor sector, and it will encourage companies to devote more resources to overcome technological bottlenecks.”

Xiang Ligang, director-general of the Information Consumption Alliance, a telecom industry association told China Daily the measures would support “the entire semiconductor chain, including chip equipment, material, packaging and testing”.

Meanwhile, a report by Accenture found that Chinese firms are falling behind by failing to place customers at the heart of their supply chains.

According to the report, just 12% of Chinese firms were on the right path to creating “resilient, purposeful supply chains” that base supply chain strategy on what the customer values, the research found. 

Leading global companies that invested in their supply chains had 13% revenue growth rates, a 2.5% higher gross earnings margin, and a three times higher contribution to total revenue, it said.

The report was based on a global survey of 900 senior executives and outlined that companies seeing the highest ROI in their supply chains followed key strategies around customer-centricity, digital infrastructure investment, supply chain agility and innovation, and ensured board-level support.

Marcello Tamietti, managing director for Accenture Greater China, said: “The Covid-19 health crisis has placed focus on delivering all essential goods and services quickly, safely and securely.”

“Now companies must double down on building more customer-centric supply chains that meet increasing and evolving customer experience demands. This will be key to growth as economies rebound.”

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