As discussed in our previous article on the topic, China’s 14th Five-Year Plan (“FYP”) is a vast document that outlines the country’s ambitious plans for the 2021-2025 period. Technology is a core focus of the plan, with several chapters dedicated to describing how China’s leaders hope to transform the country into an innovation powerhouse. The semiconductor industry—particularly the integrated circuits (IC) industry—is a core component of this effort as China sees semiconductor capabilities and supply as intrinsically linked to its economic and national security, a conviction that has sharpened in recent years as U.S. policy has taken aim at Chinese supply chain vulnerabilities. For these reasons, it is important that companies in or affected by the semiconductor industry take note of the policy signals in the 14th Five-Year Plan along with those in the State Council’s important August 2020 policy for the industry. China’s policy is evolving quickly, so it is critical to monitor local and sectoral policies and programs that build on these two documents.
The integrated circuits industry is one of seven frontier fields targeted in the FYP for substantial investment through national key science and technology projects. The FYP specifically aims for breakthroughs in:
- integrated circuit design tools;
- key semiconductor equipment and materials (e.g., high-purity targets, insulated gate bipolar transistors (IGBT), and micro-electromechanical systems (MEMS);
- advanced memory technology;
- wide-gap semiconductors (e.g., silicon carbide, gallium nitride).
The plan separately lists high-end chips and neurochips as technologies important to the country’s aims to build a digital economy.
Our team has prepared a copy of the 14th Five-Year Plan (with its original Chinese text) that highlights, translates, and summarizes semiconductor industry-specific content. It can be accessed here.
Where the Action Is: Local and Sectoral Plans
Although the five-year plan’s guidance is high-level, it is an important signal to central government ministries and local governments about where the government wants them to focus their efforts. How central and local officials implement these guidelines—e.g., via their own plans (some of them also called 14th five-year plans), policies, measures, and programs—will determine the actual opportunities and risks for foreign and domestic companies in the market. A small sampling of such efforts in the semiconductor area that stem from or coincide with the national 14th Five-Year Plan are listed below.
- National Advanced Manufacturing Industry Clusters – The 14th Five-Year Plan calls for cultivating advanced manufacturing industry clusters to promote innovation and foster the development of a range of technology industries, including integrated circuits. In a recent announcement, the Ministry of Industry and Information Technology (“MIIT”) stated that it will be targeting 25 advanced manufacturing industry clusters for special attention, making them eligible for enhanced central- and local-level policy and financial support, such as through government investment funds. Among them is the Shanghai Integrated Circuit Cluster, with the Shanghai municipal government mobilizing RMB 300 billion (nearly US$50 billion) in funding for this effort during the 14th Five-Year Plan period.
- MOST National Key R&D Plan – At a press conference, the Ministry of Science and Technology (“MOST”) mentioned plans to direct resources under the National Key R&D Plan and other major programs towards key technologies and basic frontier research in the semiconductor industry, and strengthen the environment for innovation by, among other things, creating platforms for collaboration between enterprises, research institutions, and academia.
- Increased SASAC Support – In the September 2021 Notice on Accelerating the Digital Transformation of State Owned Enterprises, the State-Owned Assets Supervision and Administration Commission (“SASAC”), which oversees China’s state owned enterprises (“SOEs”), calls on SOEs to address national shortcomings in the areas of core electronic components, high-end chips, and core software. Further, at a press conference on the margins of the National People Congress in March 2021, SASAC committed to increasing funding to support breakthroughs in the IC industry.
- Beijing’s 14th Five-Year Plan – The Beijing government’s plan for the 14th five-year period (2021-2025) targets the development of an innovation ecosystem for the integrated circuits industry, with IC design, manufacturing, and equipment as areas of interest. The plan names several industry parks and zones for new or further development. For example, the Beijing Economic-Technological Development Area, which includes an IC equipment industrial base that is slated for expansion, has been tapped to draft a technology roadmap to build an “independent and controllable” IC industry ecosystem, reaching a scale of RMB 100 billion in output by the end of 2025.
- Shanghai’s 14th Five-Year Plan – Shanghai’s plan for the 14th five-year period also identifies the integrated circuits industry as a major target for development. It is one of three focus industries (the other two being biomedicine, and artificial intelligence). Under the plan, the Shanghai government will support projects aimed at advanced manufacturing, design, equipment, materials and EDA tools, as well as smart chips and artificial intelligence. The plan calls for the development of an IC industry cluster along the Yangtze River Delta and innovations to the Shanghai free trade zone to support the development of this industry. Like Beijing, independent innovation and a desire to build a comprehensive ecosystem for the industry loom large in Shanghai’s plan.
- Jiangsu Province’s 14th Five-Year Plan – Home to major Chinese urban centers such as Nanjing, Suzhou, and Wuxi, Jiangsu Province’s 14th Five-Year Plan identifies integrated circuits as a top priority industry chain for development. The plan targets breakthroughs in core technologies and IP, and calls for establishment of provincial-level advanced manufacturing clusters for products such as integrated circuits and displays that can produce over RMB 6 trillion in output value by 2025. The plan also discusses laying the groundwork for future industries including third-generation semiconductors.
- Zhejiang Province’s 14th Five-Year Plan – Zhejiang Province, home to major cities such as Hangzhou, Ningbo, and Wenzhou, has issued a five-year plan that addresses industry and supply chain risks with a focus on ten industry chains. One of them is the integrated circuit value chain, but several others also touch upon chip-related technologies, including a digital security industry chain and an intelligent computing industry chain. The plan also targets the development of advanced semiconductor materials and seeks to cultivate future industries, such as third-generation semiconductors, brain-inspired chips, and flexible electronics.
- Hubei Province’s 14th Five-Year Plan – Hubei Province, home to the city of Wuhan, aims in its 14th Five-Year Plan to build “four major national strategic emerging industry clusters,” including one focused on the integrated circuit industry; build “four key bases” including a national memory-chip base; and incorporate innovations in four technological areas into industry: artificial intelligence, big data, the internet of things, and block-chain.
Companies with business interests affected by Chinese semiconductor policies should carefully monitor these and other local and sector developments as they determine how best to navigate this rapidly evolving terrain, and may consider engaging with Chinese policymakers where necessary to express their needs or share best practices from an industry perspective.