“Chip Promotion Law” Proposal at China’s Two Sessions
Translating the Chinese Communist Party’s perspective on semiconductors
Chip Capitols’ off-week deep-dive into Chinese media examines a proposal by a prominent Chinese Communist Party (CCP) member, Xie Shanghua 谢商华, for the PRC to adopt a Chip Promotion Law 芯片促进法.
Proposed at the recently concluded Two Sessions 两会, this amounts to a recommendation by the CCP for the PRC government to take legislative and administrative action in support of China’s domestic semiconductor industry. It is important to study Xie’s ideas carefully as Party-level policy recommendations often set the framework for future government policies.
Xie first lays out the problems facing China’s chip industry:
China’s semiconductor policymaking is not sufficiently robust. National-level policies are too abstract, and past Chip Capitols articles show that local governments’ IC fund investments often do not align with China’s greatest supply chain weaknesses. China prefers to “let a hundred flowers bloom” (百花放弃), where the flowers are local governments’ unique policy tools.
China is too dependent on foreign semiconductor technology, and it faces severe chokepoints across the chip supply chain. This echoes growing language by PRC President and CCP Chairman Xi Jinping over the past five years that national science policy should serve to bolster China’s access to chokepoint卡脖子 technologies, where it is current reliant on foreign providers. Mitigating chokepoints represents a new pillar to China’s science policy, which a previous Chip Capitols article explains was previously driven primarily by the pursuit of global technological leadership and the advancement of strategic end-use technologies.
Other countries are rapidly subsidizing their own semiconductor industries, and US-led export controls threaten to stifle foreign investment in China. Xie laments that China’s chip industry faces an “increasingly grave” situation due to foreign subsidies and trade restrictions. He ends this paragraph poetically, saying that “without chip security there can be no national security.”
The article proceeds to summarize Xie’s proposal for legislative and administrative action to bolster China’s chip industry. A distinct “Chip Promotion Law” is part of his suggested strategy, but his recommendations extend beyond subsidies to STEM education and financing:
One Chessboard – Xie urges national-level policymakers to align the country’s various semiconductor development efforts under a single national chip strengthening strategy. As shown in this Chip Capitols article, local governments often award chip subsidies post-facto to whatever large investments companies make in their jurisdictions. As in the US, provincial and municipal governments in China are primarily concerned with promoting economic activity, so many do not consider national supply chain needs when issuing incentives. My suspicion is that this national chip strengthening strategy will identify key national semiconductor chokepoints and direct local governments to focus their subsidies on bolstering these parts of the supply chain.
Root Technology – Xie recommends a slate of policy improvements to support advanced microelectronics research and to help innovators commercialize new technologies. To that end, he calls for chip R&D funds by both the central and local governments, funding for basic research at universities and government labs, strengthened semiconductor IP protection, and better supply chain management.
STEM Education & Revealing the List – Xie proposes a detailed list of educational reforms to support China’s semiconductor workforce. He calls for IC engineering topics to be included in China’s college entrance exam (the gaokao), a unified enrollment index to track graduate students studying microelectronics subjects, and accelerated degree programs for engineering degrees. This would function alongside further high-skilled immigration reform to attract global IC talent.
He also suggests applying a relatively new concept in Chinese science policy to national semiconductor research goals, jiēbǎng guàshuài (揭榜挂帅). This roughly translates to “revealing the lists and taking command.” Local governments and the central government have embraced this strategy of publishing lists of technology needing to be developed and awarding innovators who bring solutions to market. It replaces earlier approaches of awarding researchers’ scientific publications that subsequently gathered dust on government shelves, never being implemented.Financial System Support – Lastly, Xie tasks a slew of China’s financial and securities regulatory departments with easing large semiconductor companies’ and chip startups’ access to capital. He suggests new risk sharing mechanisms and supporting semiconductor companies seeking to list on domestic and foreign stock exchanges.
The article I translated below appeared in Cailian 财联社, a financial affairs paper managed by media groups under the People’s Daily 人民日报 (the CCP’s official newspaper). Chip Capitols will be back next week with another very exciting article written in collaboration with an incredible classmate of mine, Mika-Erik Möser. We will take a deep dive into how policy mechanics differ between how the US and European Union direct public funds to their semiconductor industries. The EU Chips Act, France’s Électronique 2030 grants, Germany’s chip subsidies, Spain’s PERTE framework, Belgium’s tech tax credits, the Netherlands R&D credits… We will dive into it all.
[Any mistakes in translation are my own. Bold, bracketed texts are annotations provided for clarity. The original Chinese text is below.]
March 4, 2023
Guo Songqiao, reporter for Cailian News Agency
Cailian News Agency, March 4 (Reporter Guo Songqiao and Zhang Yuhong) – In recent years, China has had some success in steadily strengthening chip policies, and this has strongly supported national information technology (IT) construction. However, other than China’s comparative advantages in the field of chip design [it is unclear to me on what the author bases this claim of comparative advantage in chip design], China still lags far behind the West in chip manufacturing, EDA, and other fields.
On March 4, Xie Shanghua, member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) and vice chairman of the Sichuan Provincial CPPCC, revealed in an interview with Cailian News Agency that this year's Two Sessions of the National People's Political Consultative Conference will submit a "proposal on accelerating the legislation of China's ‘Chip Promotion Law.’” [A “Chip Promotion Law” does not yet exist. This is a proposal to more quickly legislate such a law.]
Xie Shanghua identifies the following problems in China's chip field:
First, China’s level of chip policymaking is relatively low. Currently, most policies that have been issued are State Council-level statutes and departmental rules.
Second, China is highly dependent on foreign countries: It produces under 10% of the parts for chip manufacturing equipment domestically and 90% of its chips are imported. China is also under a chokehold for key technology.
Third, national security risks have risen. In 2021, Japan released its Strategy for Semiconductors and the Digital Industry, which places the semiconductor industry on equal footing with food and energy as a critical "national project." In 2022, the European Union promulgated the EU Chips Act [as of this article’s publication, the EU Chips Act has not yet entered law], committing to invest 43 billion euros by 2030 to support chip design and manufacturing. Furthermore, western countries, led by the US, have prohibited the Dutch company ASML from selling EUV lithography machines to China through the establishment of integrated circuit (IC) industry alliances and the formulation of the Wassenaar Agreement. This in turn has hindered the manufacturing of chips 14nm and below in China. The US also passed the CHIPS and Science Act to provide $52 billion in support to its domestic semiconductor companies [this incorrectly suggests that only domestic American companies qualify for CHIPS Act grants; foreign companies from non-adversarial nations are eligible]. Further preventing American semiconductor companies from expanding facilities in China, some provisions of this bill restrict companies’ normal economic, trade, and investment activities in China. As a result, the situation of China’s chip field is growing increasingly grave. Without chip security, there can be no information security. Without chip security, there can be no national security.
To that end, Xie Shanghua suggested the following:
1. Accelerating chip policymaking and implement a national chip strengthening strategy— Place chip and IC development at the top of the national security strategy. Relevant departments under the National People's Congress should formulate a new “Law of the People's Republic of China on the Promotion of Chips.” The State Council and relevant departments should formulate laws and administrative regulations related to chips and integrated circuits. In shaping these laws and regulations, they will ensure the sustainable, healthy, and high-quality development of chips and software in the medium to long term.
We should adhere to the principle of "one chessboard for the whole country," bring together our resource advantages, and capitalize upon our advantages. Our leading enterprises should jointly tackle key problems, coordinate, and carry out development plans in unison. We should support the sustainable and healthy development of equipment components, 7nm, 5nm, and 3nm advanced manufacturing processes, and large industrial EDA software. We should avoid popping an artificial bubble via blind development.2. Accelerating sustained investment and promoting joint research on key core technologies— Guided by the needs of the national chip strategy, we should formulate a reasonable 5-year plan for the government to support the high-quality development and intensified research of ICs and software. Critically, we must establish IC research and development funds and guide the central government, as well as qualified local governments, to increase their financial support for the industry. We must strengthen the protection of chip IP rights throughout the development chain. Institutions of higher education and enterprises researching core chip innovations, EDA, basic software, and other generalizable technologies must also receive support to grow their R&D efforts and achieve disruptive breakthroughs in "root technologies." We must strengthen cooperation upstream, midstream, and downstream across design, packaging, manufacturing, and inputs in order to strengthen the application of our own IP achievements.
3. Accelerate talent cultivation and implement an IC workforce strengthening plan— We must strengthen basic STEM education and build the ranks of scientific research talent. Specifically, we should incorporate ICs and software into the “foundations section” of the college entrance exam [the gaokao], set up a single enrollment index for IC masters and doctoral students, and implement special training programs [accelerated degree programs] such as: "3+2" undergraduate and postgraduate integration, "3+4" undergraduate and postgraduate integration, and "2+3" postgraduate integration. Qualified educational institutions should also receive support to cultivate talent capable of developing high-level IC and software cross-applications. We must also support qualified universities, research institutes, and enterprises to strengthen basic IC research education, establish and improve think tanks, and bridge technology and practice.
We must accelerate the cultivation of first-class experts who both understand theoretical research and have conducted forward-looking and practical advanced process research. We must carry out interdisciplinary, cross-industry integration. This will allow us to “reveal the lists and take command,” giving rewards for major breakthroughs. [揭榜挂帅 refers to governments publishing lists of technology needing to be developed and awarding innovators who bring solutions to market.] Lastly, we must establish a comprehensive and flexible talent importation policy to attract the world’s top IC experts and scholars.4. Strengthening policy support and making a conducive environment for IC development— We must increase financial support to develop and grow the chip industry’s established leaders and specialized startups. The People's Bank of China will lead the China Banking and Insurance Regulatory Commission (CBRC), the China Securities Regulatory Commission (CSRC), State Administration of Foreign Exchange (SAFE), the Ministry of Industry and Information Technology (MIIT), and the Ministry of Education (MOE) to formulate recommendations on financial support for chips and ICs.
We must make full use of venture capital and private equity, IP pledge financing, IP securitization, industrial investment funds, and other financial instruments to invest in chip innovation, R&D, and commercialization. This will promote the listing of leading chip companies on the Shanghai Stock Exchange Science and Technology Innovation Board (the STAR Market). Specifically, we should also lower the threshold for listing, so chip companies can raise funds on capital markets and provide a smooth exit mechanism for venture capital. We must support eligible enterprises to list and raise funds domestically and abroad on the Hong Kong, London, Frankfurt, Swiss, and other stock exchanges. We should establish a sturdy risk sharing mechanism for ICs and promote financing for the IC industry’s stability and prosperity.
两会时间｜全国政协委员、四川省政协副主席谢商华：建议加快芯片立法进程，“防止一轰而上、盲目发展”
2023-03-04
财联社记者 郭松峤
财联社3月4日讯（记者郭松峤 张玉虹）近年来，我国持续加强芯片方面规制建设，取得一定成绩，有力支撑了国家信息化建设，但是我国除了在芯片设计领域具有相对优势外，芯片制造、EDA等领域与西方国家还存在较大差距。
3月4日，全国政协委员、四川省政协副主席谢商华在接受财联社采访时透露，今年全国两会将提交一份 “关于加快我国‘芯片促进法’立法的提案”。
谢商华分析我国芯片领域存在如下几点问题：
一是芯片相关规制层级较低。目前已经出台的政策主要是国务院层面的法规和部门规章。
二是对外依存度大。中国芯片设备国产化率低于10%，芯片90%依赖进口，核心技术被锁喉。
三是国家安全风险上升。2021年，日本发布《半导体数字产业战略》，将半导体行业视为与食品能源行业同等重要的“国家项目”。2022年，欧盟颁布《芯片法案》，明确在2030年之前，投入430亿欧元资金，支持芯片设计与制造。以美国为首的西方国家，通过建立集成电路产业联盟和制定《瓦森纳协议》等形式，禁止荷兰的阿斯麦将EUV光刻机出售给中国，致使我国在14NM及以上芯片制造受阻。美国还通过签署《芯片和科学法案》，为美国半导体公司提供约520亿美元的支持，进一步阻止美国相关集成电路到中国设厂，部分条款限制有关企业在华正常经贸与投资活动，中国在芯片领域受制于人的情况愈加严重。没有芯片安全，就没有信息安全、国家安全。
为此，谢商华建议：
一、加快芯片立法进程，实施芯片强国战略。把芯片及集成电路发展放在国家安全战略的高度，由全国人大牵头有关部门，制定《中华人民共和国芯片促进法》，国务院及相关部门牵头制定与芯片及集成电路有关法规部门规章，以法律法规部门规章的形式，保障未来中长期内芯片与软件的持续健康、高质量发展。坚持全国一盘棋，集中优势资源、优势占尽、优势企业联合进行攻关、联合进行协同、联合进行发展布局，支持开展设备元器件和7纳米、5纳米、3纳米先进制程研究，支持EDA软件等大型工业软件持续健康发展，防止一轰而上、盲目发展。
二、加快持续性投入，推动开展关键核心技术联合攻关。以国家芯片战略需求为导向，制定政府未来五年支持芯片及集成电路与软件高质量发展相适应的合理规划，提高研发强度，重点要成立芯片及集成电路研发基金，引导中央和符合条件的地方政府加大财政支持力度。加强芯片知识产权全链条保护，支持高校院所、企业在芯片核心技术、EDA软件等通用技术及基础软件方面，加大创新研发力度，实现有关“根技术”颠覆性突破。从设计、封测、制程和供应链等方面，强化上中下游产业链协同配合，加强芯片自主知识产权成果转化运用。
三、加快人才培育，实施集成电路人才强基计划。强化基础科学教育和科研人才队伍建设，将集成电路与软件纳入高考“强基计划”，单设集成电路硕士研究生和博士研究生招生指标，实施“3+2”的本硕贯通、“3+4”的本硕博贯通、“2+3”硕博贯通等特别培养计划，支持符合条件的学院超常规培养集成电路和软件交叉应用的复合高端人才。支持符合条件的高等院校、科研院所和企业加强集成电路的基础研究、培训和教育，建立健全专家智库，强化技术与实践结合，加速培育既懂理论研究又具有前瞻性、实战性、操作性、先进制程研究方面的顶级专家，开展跨学科、跨行业、跨领域等多学科的交叉性融合，支持开展揭榜挂帅，对于获得重大突破实行重奖。建立健全集成电路柔性人才引进机制，面向国际招揽在芯片领域及集成电路领域的顶级专家和学者。
四、加强政策支持配套，营造集成电路发展良好环境。加大金融支持力度，支持与芯片相关的龙头核心企业和专精特新企业发展壮大。由人民银行牵头银保监会、证监会、外管局、工信部、教育部等研究制定金融支持芯片及集成电路发展的意见。充分运用VC/PE、知识产权质押融资、知识产权证券化、产业投资基金等多种金融工具投入芯片创新研发与产业化，推动一批芯片龙头核心企业科创板上市。降低门槛，利用多层次资本市场为芯片类企业上市募集资金提供绿色通道，为风投等提供顺畅的退出机制。支持符合条件的企业，在境内和境外的香港、伦敦、法兰克福、瑞士等证券交易所进行上市融资。建立健全集成电路风险分担机制，推动金融支持集成电路产业行稳致远。