120 Billion National IC Support Fund, 30% Invested in Chip Design

       The total budget of the National IC Support Fund is 120 billion yuan, with a time frame spanning from 2014 to 2017. According to the currently drafted implementation rules, the support fund will be composed of 30 billion yuan from government fiscal allocation, 45 billion yuan from the social security fund, and 45 billion yuan from other sources. The China Development Bank will be responsible for establishing a fund company to coordinate the overall management, of which 40% will be invested in wafer manufacturing and 30% in chip design. The above details have not been confirmed by authoritative departments.

This will be the largest-scale support fund for the domestic integrated circuit industry, exceeding the total R&D investment of the industry over the past decade.

On the one hand, after years of development, a number of companies with certain capabilities have emerged in the domestic integrated circuit industry. However, overall, the gap with international companies remains significant, and substantial government support is needed to help them grow stronger. On the other hand, following the PRISM scandal, information security has received top-level attention from the national leadership. Yet integrated circuits, which are at the core of information security, still rely heavily on imports, making government support inevitable.

A relevant representative from Leadcore Technology told reporters from China Business News yesterday that this national support policy for the integrated circuit industry is related to the country's emphasis on information security and its strategy of promoting the industrialization of national information technology.

In fact, as early as November last year, the national level had already determined to introduce policies to support the integrated circuit industry. The plan, led by the Ministry of Industry and Information Technology, will focus on supporting wafer manufacturing, chip design, packaging, and upstream production equipment.

The support fund will enter integrated circuit enterprises through equity investment. At the operational level, the China Development Bank will be responsible for establishing a fund company, which will select high-quality enterprises for investment.

This support model differs significantly from previous approaches. Over the past decade, the government has introduced multiple support policies for the integrated circuit industry, mainly including tax reductions and project subsidies, typically covering the entire industry. Industry insiders have described this as a "sprinkling pepper" approach. This time, however, there is a clear trend toward market-oriented operations.

"The fund company will conduct comprehensive evaluations of enterprises' financial indicators, company size, and profitability according to market-oriented rules. This will help channel funds to companies that need money and can operate effectively," said Wang Yanhui.

In his view, larger integrated circuit companies that have already achieved market success will benefit the most, while newly established startups may not be as favored by the fund.

This is also the main purpose of the current support policy — to help the domestic integrated circuit industry grow stronger. Previously, news had emerged that the national level would focus on supporting more than ten key integrated circuit enterprises, promote industry consolidation, and enhance the competitiveness of leading manufacturers.

According to the "Report on the Development of China's Semiconductor Industry (2013 Edition)," China's top ten integrated circuit design companies in 2012 included HiSilicon, Spreadtrum, RDA Microelectronics, CEC Huada Electronic Design, Silan Microelectronics, GalaxyCore, and Leadcore Technology. Leading semiconductor manufacturers include SMIC, China Resources Microelectronics, Tianjin Zhonghuan Semiconductor, and Hua Hong Semiconductor. Additionally, companies primarily engaged in semiconductor packaging and testing include JCET, NTMF, and Huatian Technology. These companies are likely to receive greater support from the National Integrated Circuit Industry Fund.

With national-level financial support, integrated circuit enterprises will be better positioned to carry out investments and mergers and acquisitions. However, Gu Wenjun, Chief Analyst at iSuppli Semiconductor, believes that companies should not pursue M&A for its own sake. The integrated circuit industry is a global, talent- and technology-intensive sector. When pursuing acquisitions, companies must fully consider synergies and team integration to avoid acquiring an empty shell. "Especially in overseas M&A, the process should be driven by fully market-oriented approaches, with the fund company supporting integrated circuit enterprises in selecting high-quality targets."