[Viewpoint] Will a 400% tax force mobile phone manufacturers to use domestic chips? The road to domestic substitution cannot be rushed

There is no need to rush to replace semiconductors with domestic products.

Recently, the Chips and Technology Act passed by the US Congress has attracted global attention. Although this bill is under the banner of reshaping the US chip manufacturing capabilities, it is actually a new round of containment of my country's semiconductor industry. According to the bill, the US government will not only use $52 billion to subsidize companies that build factories in the United States, but also restrict related companies from building factories in China and impose restrictions on China's chip exports.

In the eyes of the outside world, the so-called chip bill of the United States is obviously contrary to the law of market development, and whether the bill will eventually be effective remains to be seen. However, for the Chinese semiconductor industry, it is also a fact that the bill further hinders the development of the industry.

Therefore, in order to cope with the adverse effects of the US chip bill, the domestic discussion on the localization of semiconductors has been revived recently. However, not all the voices in the public opinion field have reference value, and some of them even fall into the same thinking as the US chip bill.

Recently, a scholar said that taxation can be used to force mobile phone manufacturers to use domestic chips. It is proposed that all mobile phones sold in the domestic market must use 30% domestic chips. If the proportion requirement is not met, heavy taxes will be imposed, up to 400%. The scholar said that this can promote the promotion of domestic chips in the market.

However, in a sense, the tax proposal of this scholar is actually the same as the chip bill issued by the US government. Both are essentially trade protection measures with the help of administrative power, and both violate the market law of market allocation of resources. Moreover, will the taxation of mobile phone chips really help the development of the domestic chip industry? After all, the additional costs of mobile phone manufacturers will also be passed on to consumers, further obscuring the real price of the market and affecting the efficiency of market allocation of resources.

Just imagine, if the best resources cannot be optimally allocated due to obstacles such as laws or taxation, can such a market economy still be called efficient? Can it still help businesses grow and create wealth?

From the perspective of industrial development, the development of the domestic semiconductor industry is certainly inseparable from policy support, but the support policy should also follow market laws.

Constrained by the chip "bottleneck" problem, my country has attached increasing importance to the development of the semiconductor industry.

In 2014, we established the China Integrated Circuit Industry Investment Fund Co., Ltd. (hereinafter referred to as the "Big Fund") to promote the development of the semiconductor industry. We hope to provide funds for the development of domestic semiconductor companies through the market-oriented operation of the Big Fund. In recent years, with industry giants such as Xiaomi and OPPO announcing their own chip development, the strength of my country's semiconductor industry development has also been strengthened.

Data shows that my country has become the world's largest semiconductor equipment market for two consecutive years. Among them, the scale of the semiconductor equipment market in mainland China in 2021 was 29.62 billion yuan, a year-on-year growth rate of 58.22%. During the same period, the scale of China's semiconductor materials market also exceeded 10 billion US dollars, reaching 11.93 billion US dollars, with a year-on-year growth rate of 21.9%, far exceeding the growth rate of Japan and South Korea during the same period, ranking among the top in the world.

However, rapid growth has not changed the current situation of my country's dependence on foreign imports for semiconductors. Data show that in 2021, my country's semiconductor imports amounted to US$462.3 billion, exports amounted to US$202.6 billion, and the trade deficit was as high as 278.8 billion yuan, an increase of nearly 20% over the same period last year. In other words, the road to domestic substitution of Chinese semiconductors is still long and arduous. So, how can my country's domestic substitution of semiconductors develop rapidly under containment?

Specifically, as a global precision industry, the establishment of the semiconductor industry chain is inseparable from the support of industrial policies and the coordination of market allocation. The domestic semiconductor substitution we are currently pursuing also needs to focus on the above two aspects.

In addition, when formulating policies to support the semiconductor industry, my country must follow the laws of market development. If we formulate policies that are obviously contrary to market laws like the United States, it will not only affect the efficient market of the domestic semiconductor market, but also cause many companies to embark on the wrong path of exploiting policy dividends by all means.

In recent years, in the process of domestic semiconductor substitution, there has been a phenomenon of chip technology "wearing a vest" in the industry. Some companies have announced that foreign technology has been localized by "disguising", but we do not actually have the autonomy of the relevant technology. In fact, as early as three years ago, Ni Guangnan, an academician of the Chinese Academy of Engineering, appealed to the industry to resist the behavior of chip technology "wearing a vest".

In order to promote domestic substitution of semiconductors, we need to be targeted and focus on the main contradictions based on the actual development of my country's semiconductor industry. From the perspective of my country's current semiconductor industry structure, semiconductor equipment and raw materials are still the biggest problems restricting the development of my country's semiconductor industry.

In 2006, in order to promote the localization of the semiconductor industry, my country proposed a special action plan for "extremely large-scale integrated circuit manufacturing technology and complete process" with the goal of replacing domestic semiconductors. At that time, the special action focused on the above two issues and proposed a number of tasks, including the development of 45-22 nanometer key manufacturing equipment. Looking back now, except for the lithography machine, the other goals of the special action have now been basically achieved.

As my country's semiconductor technology continues to approach the international top, the gap between our equipment and materials industry and the international leading level is becoming more and more obvious. From a technical level, the areas where we have made breakthroughs are mostly low-end and mid-end, and most of the high-end technologies are still in the hands of foreigners. For example, the world's most advanced lithography technology is firmly in the hands of Dutch supplier ASML. Even companies like Intel and Samsung need to compete to buy lithography machines from ASML. For the former, getting high-process lithography machines in advance means getting more orders.

It is true that it is still difficult for my country to overtake others in ultra-high-end equipment such as lithography machines. However, the implementation of the "12th Five-Year Plan" special action has also proved that my country's institutional advantage of concentrating resources to accomplish major tasks can still help us grow rapidly in the semiconductor industry competition.

In the final analysis, semiconductors are still essentially a capital-intensive industry. If my country wants to achieve the goal of domestic semiconductor substitution, it still needs to give full play to the institutional advantages of concentrating resources on major tasks and keep making progress on the basis of respecting market rules. Compared with the suggestion of taxing mobile phone products, the long road of domestic semiconductor substitution undoubtedly requires more practical suggestions and opinions.

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As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.