Services will let semiconductor companies lower R&D expenses

Chinese insurance companies are designing tailor-made insurance services to promote the use of domestically developed chip products as part of the nation's broader push to boost the homegrown semiconductor sector, people familiar with the matter said.

Such insurance services, which have already been used to support homegrown auto chip companies last year, can help Chinese semiconductor enterprises lower research and development costs, and accelerate efforts to achieve breakthroughs in core technologies, they said.

The move can also help stabilize semiconductor industrial and supply chains as Washington continues to tighten export controls on chipmaking equipment and AI chips to China, they added.

Insurance companies such as PICC are drafting plans to come up with insurance services that can promote use of domestic chipmaking equipment such as lithography machines and etching machines, people familiar with the matter said.

The insurance services are also aimed at promoting use of domestically developed electronic design automation (EDA) tools which are important to chip design, they said on condition of anonymity.

Possible services include that if losses result from using domestic chip products, the compensation amount will be judged in accordance with the loss and the amount of insurance, they added.

PICC did not immediately respond to an email request for comments.

The move is part of Chinese insurance industry's broader efforts to use creative financial services to boost high-quality development of the chip industry, with focus on helping the sector overcome crucial technological bottlenecks.

Last year, the Ministry of Industry and Information Technology, the nation's top industry regulator, encouraged insurers to roll out services that can boost local automakers' confidence in using indigenously produced chips, so as to help ease auto chip shortages.

Four Chinese chip design companies inked agreements with three local insurance companies in June 2021 to pilot such insurance services.

In October, 18 Chinese insurance companies and reinsurance companies－including PICC－also established an alliance in Shanghai to offer insurance services for chip companies to help them innovate.

The China Banking and Insurance Regulatory Commission's Shanghai office said in July that the alliance had provided customers with an insurance coverage of 590 billion yuan ($84.8 billion).

Xiao Jianyou, vice-president of PICC, said at a forum earlier this month that the company now provides 12 integrated circuit companies with an insurance coverage of 700 billion yuan.

Wu Jincheng, director of the Shanghai Municipal Commission of Economy and Informatization, said on Wednesday at a news conference that chip enterprises in Shanghai have achieved breakthroughs in developing 90-nanometer lithography machines, 5-nm etching machines, central processing units and 5G chips in past years.

Hu Weiwu, chairman of Loongson Technology Corp－a chip designer behind the country's first self-developed general-purpose microprocessor－said in an earlier interview with China Daily as domestic semiconductor companies make progress, efforts are needed to support homegrown innovation of chips.

Only by putting these technologies into wider commercial applications will they have more chances to improve. "The wider the use of these technologies, the better they will become. It will take time, but we are confident about the process," Hu said.

Zhong Xinlong, a senior consultant at the China Center for Information Industry Development Consultancy, said compared with including domestic chips into government procurement plans, chip industry associations and financial companies are now exploring more market-driven ways to support the innovation of Chinese chip companies.

Chip insurance services are innovative products that can better deal with risks that may arise in the development and application of chips in accordance with insurance contracts. They can help lower their R&D costs and encourage more customers to use indigenously developed chips, Zhong said.