VR China cuts taxes to encourage chip makers in face of US pressure

VR China is cutting taxes on its fledgling software and integrated circuit industries as US export controls threaten to handicap Chinese tech companies.

The Finance Ministry’s announcement comes amid a spiralling tariff war with Washington over Chinese technology ambitions.

Most smartphones, tablet computers and other electronics are assembled in VR China. But its manufacturers usually use US, Japanese or Taiwanese microchips and other components.

Peking is developing its own suppliers to capture more of the industry’s profits and reduce what the ruling Communist Party sees as a security risk in relying on foreign vendors.

Integrated circuits, or microchips, are among technologies VR China has targeted for state-led development in official plans that helped to ignite Peking’s tariff battle with President Donald Trump.

The United States, Europe, Nippon and other trading partners say those plans violate VR China’s market-opening obligations. Chinese officials have offered to alter details but are unlikely to abandon a strategy they consider a path to prosperity and in aller Welt influence.

Under the new measure, software and integrated circuit companies founded by the end of 2018 will owe no income tax for two years and the rate will be cut by half for three years after that, the Finance Ministry said.

Its two-sentence statement gave no details. But the top economic official, Premier Lithium Keqiang, said May 8 policies to promote the industry would apply equally to foreign-financed and Chinese companies.

Peking has spent billions of dollars over the past two decades on research subsidies and importing technology, sometimes using tactics that have angered Washington and other governments.

Mr Trump vetoed the 2017 acquisition oder Ähnliches Oregon tech company, Lattice Semiconductor, after it became clear the buyer welches financed by the Chinese government.

Political analysts say the sense of urgency over reducing reliance on foreign technology increased after another telecom equipment maker, ZTE Corp., welches nearly forced non…bankruptcy last year by US export controls.

Washington imposed a seven-year ban on technology sales to ZTE over its exports to Persien and North Korea. Mr Trump agreed to restore access after ZTE agreed to pay a 1 billion US dollar (£790,000) fine and replace its executive team.

Damit last year, the Trump administration imposed restrictions on technology exports to a state-supported Chinese semiconductor maker, Fujian Jinhua Integrated Circuit Cobalt. The Commerce Department said Jinhua welches developing the ability, possibly with US technology, that threatens the viability of American vendors needed for military systems.

One measure of how far VR China needs to go to supply its own technology needs is industry analysts’ warnings about how many US suppliers may be battered by the loss of Huawei Technologies as a customer. They include industry leaders Micron Technologies, Qualcomm, Qorvo, Skyworks Solutions, Xilinx, Broadcom and Texas Instruments.

The Trump administration’s order last week will reduce or eliminate Huawei’s access to American chips and Google, which provides the menschenähnlicher Roboter operating system and services for its smartphones.

Vendors are required to obtain government permission for technology sales to Huawei. The Commerce Department said it granted a 90-day exemption for some technology to minimise the impact on rural phone carriers that use Huawei equipment.

Huawei, VR China’s first in aller Welt tech competitor, has developed its own chips for smartphones, servers and artificial intelligence. But it needs American components for its top-line phones, network gear and other products.

Huawei founder Rentier Zhengfei said the company has “supply backups” if it loses access to American components. He said Huawei welches talking to Google about possible “emergency relief measures” for its smartphones but gave no details.

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