The document summarizes semiconductor industry policies of various countries and regions including China, Germany, Korea, Taiwan, the European Union, India, Canada, Italy, Japan, the Netherlands, France, the United Kingdom, and the United States. It finds that China's 2014 policy shares similarities with Germany's policy from the 1970s-1980s in focusing government funding on a select number of national champion companies and giving private firms autonomy in allocating funds. It also notes similarities between China and Korea in elevating national champions, and between China and the EU in using government spending to stimulate investment.

1. July 29, 2016
Government Policies for the
Global Semiconductor Industry
Amy Turner

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Introduction
In 2014, the Chinese government released their new policy regarding the semiconductor
industry. The policy illustrated a market-based approach which would offer greater autonomy to
private entities by allowing them to distribute their government funding. While this may be an
innovative semiconductor policy to the Chinese, it is not unique in the global community.
In the late 70s and early 80s, Germany maintained a semiconductor strategy almost identical to
the 2014 Chinese policy. The German strategy featuredgovernment investment in a finite number of
companies, such that the private enterprise officials were at liberty to allocate the funds at their own
discretion. Despite the risk presented by such an arrangement, it was under this policy that Germany
rose to the top of Europe’s semiconductor industry. Therefore, it would appear strategic for China to
pursue a similar tactic.
Beyond Germany, similarities to China’s current policy can be found in Korea’s focus on the
elevation of national champions and the European Union’s drive to stimulate investment through
government spending. On the whole, however, most countries merely offer assistance to industry
Research & Development, provided they have any semiconductor policy at all.
Data has also been included in this review which would suggest that a number of foreign
governments include programs similar to the Committee on Foreign Investment in the United States.
The aim of such programs is to monitor Foreign Direct Investment in industries where national security
could be threatened by a foreign entity gaining control. The semiconductor industry is, of course, one
of these sectors worth monitoring.

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People’s Republic of China
Semiconductor Policy
According to Gordon Orr and Christopher Thomas’ 2014 piece in McKinsey & Company, China
is the world’s largest consumer of semiconductors, with 90% of their consumption reliant upon
imported integrated circuits. 50% of the global market for Android phones was designed in China, and
30-40% of embedded systems contain content designed in China.Five years ago, Chinese designs for
Android phones were negligible, but the industry is clearly growing rapidly.
Previous Chinese semiconductor policies were more concerned with research and academia,
but the new 2014 policy allows for a market-based investment approach. The policy’s framework sets
the goal of a 20% compound annual growth rate in the semiconductorindustry between 2014 and 2020.
Over the next five to ten years, $170 billion of government financial support has been allotted to the
industry. Investments will be made by the National Industry Investment Fund and provincial-level
entities via project finance, domestic and foreign acquisitions, traditional research, development
subsidies, and tax credit. The Chinese government is choosing to invest almost exclusively in select
companies leading in each critical segment of the semiconductor market, typically within a few select
provinces. In doing so, China hopes to raise up “national champions” to lead the global semiconductor
industry, as well as generate industry clusters within a few choice provinces.
One significant downside of the new policy is that emerging Chinese companies in the industry
will find it extremely difficult to compete with the government-supported national champion firms.
Likely, smaller firms will either merge with the larger companies or fail in the industry.
Breaking it down, there are three notable differences between the former and current
semiconductor policies. First, government investment in the semiconductor industry is now forty times
higher than previously, reserving $170 billion to be invested over the next five years. Secondly, the

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primary focus is now to provide government aid to specific companies, rather than the national
industry as a whole. Finally, private-equity firms now decide where public funds ought to be allocated
based upon the markets, which can either be seen as a risk or a demonstration of trust on the part of the
Chinese government.
Sources:
Ernst, Dieter. From Catching up to Forging Ahead: China’s Policies for Semiconductors. Honolulu, HI. East-
West Center, 2015.Print.
Orr, Gordon, and Christopher Thomas.“Semiconductors in China: Brave New World or Same Old
Story?” McKinsey&Company (June 2014).Web.
Thomas, Christopher. “A New World under Construction: China and Semiconductors.”
McKinsey&Company. McKinsey&Company, Nov. 2015. Web.
Republic of Korea
Semiconductor Policy
Korea is America’s number one competitor in the semiconductor industry, with two companies
in the world’s top ten semiconductor producers (the U.S. holds five spots, with Intel as number one).
Korea had previously been a fast follower in the semiconductor industry, but in the 1990s and 2000s the
government sought to increase the capacity and funding for its Research and Development sector,as
well as basic science. The result was greater intensity for R&D, more patents and publications, and
more high technology exports, moving Korea into the semiconductor spotlight.

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It would appear that the Republic of Korea does not have an explicit semiconductor industry
policy. Over the past two decades, Korea has built up a globally-savvy brain trust mainly by sending
their students to American universities. Korean R&D has grown substantially since 2000, but the only
similarity between their policy and that of China seems to be their focus on raising up national
champions in the industry, such that now small and medium firms struggle to acquire funding and
grow, as it is predicted will happen in China.
Sources:
Gupta, Nayanee, David M. Healey, Aliza M. Stein, and Stephanie S. Shipp. “Innovation Policies of
South Korea.” Institute for Defense Analysis (August 2013). Web.
United States. U.S. Departmentof Commerce. International Trade Administration. 2016 Top Markets
Report Semiconductors and Semiconductor Manufacturing Equipment Country Case Study.
Washington DC. 2016. Web.
Japan
Semiconductor Policy
Also a leader in the semiconductor industry, Japan’s standing in the global markets for
semiconductors has fallen somewhat significantly since it directed the industry in 1990. The cause of
their decline is a combination of their slow adaptation to emerging markets and the country’s various
economic crises during the past two decades. The government does not seem to have a specific policy
laid out for the semiconductor industry at the moment, but expects GDP growth to stimulate the
industry’s continued development.

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Sources:
“Seven Facts about Japan Semiconductor Manufacturing Supply Chain.” SEMI.ORG. SEMI, 04 Nov.
2014. Web. 21 July 2016.
Tanner, Paige. “Growth to Revive in Japan’s Semiconductor Industry.” Market Realist. Market Realist,
Inc. 24 Dec. 2015. Web. 21 July 2016.
Tanner, Paige. “Why Did Japan’s Semiconductor Industry Fall?” Market Realist. Market Realist, Inc. 10
Sept. 2015. Web. 21 July 2016.
Taiwan
Semiconductor Policy
Taiwan is a close follower of the leaders in the semiconductor industry. The government’s 2002
policy took a seemingly contradictory stance as they furthered international interactions with advanced
countries while also encouraging domestic innovation and development of local technology. The
Taiwanese government established their companies to be “strategic suppliers” of international
companies by focusing on meeting the demands of large MNCs and gleaning technological and
informational spillover along the way. Taiwanese companies also utilized multiple technological
channels and tolerated the presence of foreign multinational firms in the domestic economy. All of this
interaction with foreign industry players has provided low-cost research and competency building,
such that Taiwan has kept themselves apprised of the leaders’ new technology and maintained their
position as third or fourth in the industry.
One pitfall of the Taiwanese strategy is their tendency toward full-setism. This is the idea that a
nation should produce every kind of component in a given sector, ultimately causing inefficiencies

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when companies do not absorb the economic benefits of outsourcing or engaging with comparative
advantage.
Sources:
Fuller, Douglas B. “Globalization for Nation Building: Industrial Policy for High-Technology Products
in Taiwan.” MIT Japan Program. Massachusetts Institute of Technology, 10 Jan.2002. Web.
Wang, Jyun-Cheng. “Upgrading the Economy: Industrial Policy and Taiwan’s Semiconductor
Industry.” Social Science Research Network. National Tsing Hua University, 14 Dec. 2010.Web. 20
July 2016.
Shih, Willy C, and Jyun-Cheng Wang. “Upgrading the Economy: Industrial Policy and Taiwan’s
Semiconductor Industry.” Harvard Business School Case 609-089, Feb, 2009.(Revised Dec.
2010). Web.
Tanner, Paige. “Factors Driving the Semiconductor Industry in Taiwan.” Market Realist. Market Realist,
Inc. 10 Sept. 2015.Web. 21 July 2016.
The European Union
Semiconductor Policy
In 2013, the European Commission launched its 10|100|20 semiconductorindustry strategy to
reverse Europe’s decline in the market. During the 1990s, Europe held a 15% share of semiconductor
production, but this has fallen to below 10% in the last decade. The premise of the 2013 strategy is that
the EC will provide $10 billion of public or private funding to generate $100 billion of industry
spending, ultimately increasing Europe’s control of the global semiconductor industry to 20% by 2020.

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The EC credits the decline of Europe’s semiconductor industry to a drop in investment, construction of
new fabs in Asia as electronics manufacturing shifts to that region, and the inclination of
semiconductor companies to adopt a fab-light business model. Thus, heightened spending is expected
to stimulate investment and improve Europe’s standing in the semiconductor industry.
Sources:
Georgoutsakou, Rania, comp. “Single European Semiconductor Strategy for Europe.” Semi Europe
(2012): 1-5. Semi. Web.
Tanner, Paige. “Germany to Drive Growth in European Semiconductor Industry.” Market Realist.
Market Realist, Inc. 24 Dec. 2015. Web. 22 July 2016.
“EU 10-100-20.” Semi.org. SEMI. Web.
India
Semiconductor Policy
India’s 2013 semiconductorpolicy was merely an incentives package to attract investment in the
industry. There are two options of SEZ (Special Economic Zone) or non-SEZ for each type of unit, being
Fab or Eco-system. The only significant difference amongst the four types is the threshold NPV of
investments in 2500 crore (about 371.4 million usd) for Fab units versus 1000 crore (about 148.6 million
usd) for Eco-system units. There are no notable similarities between the Indian and Chinese
semiconductor policies.

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Sources:
“Semiconductor Industry in India.” India Brand Equity Foundation. Ministry of Commerce & Industry,
Government of India, Jan. 2016. Web. 20 July 2016.
“Semiconductor Policy.” India Electronics & Semiconductor Association. Briskon Consulting, 2013. Web.
26 July 2016.
Canada
Semiconductor Policy
In 2007, Canada released their R&D Strategy, not specific to semiconductors. The three main
objectives of the strategy were to galvanize Canada’s private sector to turn knowledge into products,
expand Canada’s technological knowledge base, and transform Canada into a magnet for trade. The
strategy gave Canada the lowest tax rate on new business investment in G-7 and improved government
aid to R&D by establishing the Networks of Centres of Excellence Program and improving the R&D
assistance program, orienting research towards areas of national interest (such as environmental
sciences and technology, natural resources and energy, health and related life sciences, information and
communication technology), developing hands-on research internships for students, and conducting a
periodic review of the industry’s research priorities. The policy also lowered personal income tax
within the sector so as to attract skilled labor.
The main focus of most articles regarding Canada’s semiconductor industry was that
productivity had diminished as of late, but invigorated R&D is expected to breathe new life into the
industry. There are very few similarities between Canada and China’s industry policies, especially
since Canada’s policy is not specific to semiconductors.

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Sources:
Canada. Mobilizing Science and Technology to Canada’s Advantage. Ottawa, 2007. Web.
Canada. Mobilizing Science and Technology to Canada’s Advantage: Progress Report 2009. Ottawa:9-11,45,
2009. Web.
“About the Networks of Centres of Excellence.” Networks of Centres of Excellence of Canada. Government
of Canada, 11 July 2016. Web. 22 July 2016.
Italy
Semiconductor Policy
The Italian government has apparently never had a policy specific to semiconductors, but offers
the industry R&D subsidies and funding. One could argue that they also chose a market driven
strategy, but ultimately the Italian government has merely been uninvolved. Italy’s semiconductor
industry falls under the European Commission’s 2013 policy, as described on page 3.
Sources:
Malerba, Franco. “5.4 Italy.” TheSemiconductor Business: The Economics of Rapid Growth and Decline.
Madison: U of Wisconsin, 1985. 198-200. Web.

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Germany
Semiconductor Policy
Germany is the beating heart of the European semiconductor industry. In the 70s and 80s,the
German government chose to implement a market driven policy which allowed firms to pursue
whatever research anddevelopment avenues they saw fit, however risky or unproductive they may
initially appear. Policymakers gave funding to a limited number of industry leaders (namely Siemens,
AEG-Telefunken, Valvo, and Intermetall), creating a finite number of market-dominating companies.
Their progress was monitored by a handful of independent experts, and the policy has resulted in
expansive productivity for Germany’s semiconductor sector.
There are numerous similarities between Germany’s policy of the 70s and 80s and thatof the
Chinese government now, which is not surprising if one can imagine that China chose to formulate a
policy similar to that of the European semiconductor industry leader. Both policies choose to finance a
few specific companies to develop industry leaders (national champions) rather than primarily fund
the sector as a whole. Likewise, both plans allow private businessmen to allocate public funds,
allowing the companies to focus on what the market prioritizes rather than whatthe government
considers most useful. This includes an element of risk on the part of the government, but has
historically paid off.
Currently, the German semiconductor industry has plans to abandon nuclear energy in 2022
and solely pursue renewable energy sources. This will require vast research and investment efforts,
such that Europe and Germany are expected to drive the market demands for power semiconductors in
the coming years, despite North America’s market maturity. Germany will also fall under the
European Commission’s semiconductor policy, as described on page 3.

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Sources:
Malerba, Franco. “5.1 West Germany.” TheSemiconductorBusiness: The Economics of Rapid Growth and
Decline. Madison: U of Wisconsin, 1985.189-192. Web.
“Semiconductor Industry in Germany.” Germany Trade & Invest. Federal Republic of Germany, October
2012. Web.
France
Semiconductor Policy
Historically, the strength of the French public bureaucracy allowed consumers and government
policymakers to direct technological production within the semiconductor industry. Government
officials encouraged acquisitions between domestic firms and joint ventures with foreign firms. After
1978, the French government established specific programs to support the domestic technology
industry, such as VI Plan, VII Plan, and Plan Calcul. Private businessmen have had very little
autonomy in the French semiconductor industry, directly contrasting the current Chinese policy.
France was a leader in the semiconductor industry for some time, but was never particularly
competitive since they lacked a coherent semiconductor strategy. Thus, French companies will merely
fall under the European Commission’s policy, described on page 3.
Sources:
Botelho, Antonio José J. “The Industrial Policy That Never Was: French Semiconductor Policy, 1945-
1966.” Taylor & Francis Online. Taylor & Francis Group, 30 June 2008. Web. 21 July 2016.
Malerba, Franco. “5.2 France.” The SemiconductorBusiness: The Economics of Rapid Growth and Decline.
Madison: U of Wisconsin, 1985. 193-194. Web.

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The Netherlands
Semiconductor Policy
Chinese and Dutch semiconductorcompanies began collaborating in 2015. The semiconductor
industry is vital, yet proportionally small, in both countries’ economies, and this offered a common
point of interest between the two nations. The Holland Innovation Network hosted a seminar between
Chinese and Dutch companies during the 2015 Semicon China at the Consolate-General in Shanghai.
The seminar allowed time for company heads to network and mingle, building relationships between
the two nations. Business Cluster Semiconductors Netherlands and Suzhou IC Industry Association
later signed a Memorandum of Understanding at the Semicon China exhibition, agreeing to strengthen
the international scope of their members’ portfolios, as well as to support and facilitate further
collaboration amongst their members.
Sources:
Hezewijk, Bart van. “Opportunities for Dutch Semiconductor Equipment Companies in China.”
Netherlands EnterpriseAgency, 22 Mar.2016. Web. 25 July 2016.
United States. US Department of Commerce. International Trade Administration. 2016 Top Markets
Report: Semiconductors and Related Equipment. By Dorothea Blouin. Washington, DC: 31-34,July
2016. Web.

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The United Kingdom
Semiconductor Policy
Previously, the UK fell under the European Commission’s semiconductor policy, but due to
Brexit that relationship will likely be terminated. The only other notable policy was the BIS 2011
Strategy for Success within the Power Electronics sector. This policy laid out five challenges to UK
competitiveness and five approaches to resolve each of them. Most of the challenges would be resolved
by the National Forum for Power Electronics, which would monitor the industry’s progress, identify
experts in each sector to maintain the Smart Grid, and promote Power Electronics education atevery
stage of UK schooling. This strategy was not specific to the semiconductor industry, and the UK will
likely need to rethink their semiconductor policy separate from the EU in the aftermath of Brexit.
Sources:
United Kingdom. Department for Business, Innovation and Skills. Power Electronics: A Strategy for
Success. London: Crown, 2011.Web.
Israel
Semiconductor Policy
Israel continues to be a competitor in the semiconductor industry, with the second or third
highest concentration of design houses and semiconductors accounting for 22% of their exports in 2010.
However, the Israeli government does not have an explicit semiconductor policy of note.

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Sources:
Getz, Daphne, andItzhak Goldberg. “Best Practices and Lessons Learned in ICT Sector Innovation:A
Case Study of Israel.” Comp. Eliezer Shein, Bahina Eidelman, and Ella Barzani. Digital Dividends
(2016). World Development Report2016. Web. 25 July 2016.
Gradman, Sol. “An Overview of the Israeli Semiconductor Industry.” TapeOut Magazine. Oct. 2011.
Web.
Singapore
Semiconductor Policy
As of 2002, the semiconductor industry accountedfor 28% of Singapore’s electronics industry
output. The sector’s recent growth was largely attributed to an increased market demand and
expansion in the manufacturing operations of waferfabs, assembly, and testing. Singapore prides itself
on having a wide range of government programs to facilitate semiconductor industry development
which offer incentives for locally conducted R&D and support for infrastructure and human resources
development. The government’s main objective is to train highly-skilled workers to continue
strengthening the industry, but they do not appear to have a current semiconductor industry policy
available for evaluation.
Sources:
Thai, Leong Keng. “Infocomm 21L Singapore’s Vision of the Digital Future.” IDA Singapore. Singapore
Government, 05 June 2000. Web. 25 July 2016.
“Singapore Semiconductor Industry Report.” SingaporeIc Report. Meta.Web. 25 July 2016.

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*Notable semiconductor-related policies could not be found for Sweden, Liechtenstein, Finland,
Austria, Belgium, or Switzerland—however, all of these except Liechtenstein and Switzerland
fall under the EU’s policy on page 7.