China is shifting focus from capacity growth to R&D in its 12th Five Year Plan (FYP), says a report from DigiTimes of Taiwan.
The change in focus will be accompanied by a shift from direct government intervention to the use of market mechanisms.
. A policy of direct government investment will also be replaced by an emphasis on market mechanisms
During the 10th and 11th FYPs between 2001-2010, the China government listed the semiconductor industry as one of the key industries to be supported.
China-based foundry firms such as SMIC, Hejian, Grace, and TSMC's Songjiang operations were founded during the 10th FYP period,
The result was that output value for China's merchant foundry industry grew from US$5.6bn 2001 to US$34bn 2010.
Despite the growth, the industry's competitiveness remained weak.
During the 12th FYP period from 2011-2015, China's semiconductor industry policy will shift the emphasis for development away from pursuing capacity and output growth and towards improving R&D capabilities for advanced technology and advanced capacity.
The government's earlier method of pouring funds directly into the industry will also be replaced by an emphasis on strengthening the operations of market mechanisms, in order to foster a group of semiconductor firms with global market share and the capacity for technological innovation.
Semiconductor firms meeting certain conditions will be eligible to receive government support, and the government will reform tax incentive policy to encourage independent innovation.