China will spend big to fix semiconductor dependence as they imported $260 billion in chips versus $162 billion in oil

China imported US$260 billion worth of semiconductors in 2017, more than its $162 billion imports of crude oil. Chinese-made chips made up less than 20% of domestic demand in the same year, according to the China Semiconductor Industry Association.

As part of a massive push to lower foreign semiconductor dependence China will be spending tens of billions to buildout semiconductor capabilities.

China is more than tripling the compensation for many Taiwan engineers. China is offering far larger salaries, eight free trips home a year and heavily subsidised housing.

Lin Yu-Hsuan, a manager at the recruitment firm H&L, said semiconductor engineers from Taiwan were lured by high pay, perks and more senior positions at Chinese chip makers like Semiconductor Manufacturing International Corp (SMIC).

More than 300 senior engineers from Taiwan have moved to mainland chip makers so far this year, joining nearly 1,000 others who have relocated since Beijing set up a US$22 billion fund to develop the chip industry in 2014, according to estimates from H&L Management Consultants, a Taipei-based recruitment firm.

About 400,000 professionals were working in China’s integrated circuit sector at the end of 2017 but China needs 720,000 workers needed by 2020.

China is also making offers to engineers in South Korea and Japan but is getting more success with Taiwan because of the common language and culture.

USA has 25% tariff on China’s semiconductor exports

The global semiconductor market reached US$354 billion in 2016 and China accounted for 60.6% of the total consumption, leading the worldwide semiconductor market growth for the six consecutive year in 2016, according to PwC.

Even before the ban and tariffs, China had been working to reduce its dependence on technology component imports. In March, it was reported that state-backed China Integrated Circuit Industry Investment Fund Co. is in talks with government agencies and corporations to raise at least RMB150 billion (US$23.96 billion) for its second fund to build up China’s domestic semiconductor industry.

The United States began collecting 25 percent tariffs on another $16 billion in Chinese goods on Aug. 23. This will hit China’s semiconductor exports.

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