WSJ writes how China is attempting to move up the value chain in semiconductors:
Having gobbled up a hefty share of the world’s low-tech manufacturing, China is now starting to stake a claim in the cutting-edge business of chip making. A host of start-up chip manufacturers, many of them backed by foreign investors and headed by Taiwanese executives, are flooding into the country and beginning to create the core of a domestic high-tech sector.
Beijing — which spent decades trying to build a tech sector through central planning — has welcomed the foreign executives’ expertise and investment, even amid growing tension between China and Taiwan over the island’s independence. China in the past several years also has begun emulating Taiwan in offering tax breaks and other incentives to encourage investment in its chip industry.
China’s government hopes a domestic semiconductor industry will wean the country from dependence on expensive foreign technology and someday challenge companies from the U.S. and other advanced economies. “We already make many of the world’s computers and cellular phones,” says Xu Xiaotian, an official at China’s Ministry of Information Industry who heads the China Semiconductor Industry Association. “This will be true in semiconductors as well.”
A thriving semiconductor industry could reshape China’s economy. Much of the nation’s economic boom so far has been fueled by cheap labor. Chip making, one of the world’s most capital-intensive industries, could help give rise to even more advanced businesses, such as chip design, and to the development of valuable home-grown intellectual property. Chip making was elemental in the creation of Japan as a high-tech powerhouse, and more recently Taiwan’s chip makers helped create a booming semiconductor-design industry.