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­sing Cash and Pressure, China Builds Its Chip Industry

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A Shanghai factory of China's Semiconductor Manufacturing International Corporation.

China wants to transform its chip industry into a world leader by 2030.

Credit: Credit Qilai Shen/Bloomberg News, via Getty Images

China wants to transform its chip industry into a world leader by 2030 and become less reliant on foreign-sourced technology.

McKinsey & Co. reported in June the government could spend $170 billion over the next five to 10 years to support promising chip makers. "There is a clear sense of urgency nowadays about semiconductors and chips in particular," says Rhodium Group founding partner Daniel H. Rosen. "There is a sense that since China is overwhelmingly still dependent on imports--especially for higher-end chips that go into everything made in the country--there is a national security vulnerability."

Government subsidies have helped the Semiconductor Manufacturing International Corporation (SMIC) become a major chip producer since its founding in 2000. Chinese officials have a deeper concern about U.S. government surveillance and the use of foreign-sourced technology components such as chips due to the fallout over the disclosures by former U.S. National Security Agency contractor Edward Snowden.

In recent months, China has increased pressure on multinational companies facing antitrust and price-fixing probes, and resolutions with tech companies that involve lower licensing fees or other technology-sharing arrangements would fit officials' industrial policy goals.

Meanwhile, some tech security analysts say Chinese hackers are targeting the chip technology of foreign companies.

From The New York Times
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