China’s acceleration of technology self-sufficiency goals under its latest five-year plan should see a flood of government support for domestic companies in this sector, and S&P Global Ratings believes tech hardware companies along the semiconductor supply chain will be key beneficiaries.

“In our view, upstream technology hardware sectors will be top beneficiaries of the policy, especially companies that support the AI supply chain,” S&P Global Ratings credit analyst Clifford Kurz said in a note on Thursday.

“This likely points to an influx of capital to the semiconductor manufacturing and related semiconductor equipment and materials companies, he added.

It is noted that the country’s latest five-year plan (2026-2030) focuses on strengthening areas seen as strategically important and weak links in the supply chain.

S&P expects bank lending to the high-tech sector to increase to about Chinese renminbi (RMB) 24.8 trillion ($3.64 billion) by 2028, up from RMB 18.6 trillion in 2025, representing a compounded annual growth rate of about 10 percent.

Besides access to funding, supports will likely also include tax breaks, and protectionist or targeted demand.

A good portion of this largesse will go toward the semiconductor sector and AI-related research.

S&P has evaluated the potential for government support for several major domestic technology hardware companies along the semiconductor supply chain, a key area of focus for China’s self-sufficiency goals.

These companies include: foundries (Semiconductor Manufacturing International Corp. (SMIC) and Hua Hong Semiconductor Ltd); semiconductor equipment (Naura Technology Group Ltd. and Advanced Micro-Fabrication Equipment Inc. China [Amec]); memory (ChangXin Memory Technologies Inc.); integrated circuit (IC) design: Hygon Information Technology Co. Ltd., GigaDevice Semiconductor Inc., and OmniVision Integrated Circuits Group Inc.

Specifically, the report examines the likelihood of the examined companies getting government support based on the following factors: technology and capability; substitution and competition; government involvement; profitability and leverage.

According to S&O, technologies are more likely to receive such backing if considered vital to the supply chain–such as chip production, semiconductor equipment manufacturing, and advanced packaging.

It also said the availability of domestic alternatives significantly influences the likelihood of government support.

The government’s incentive to intervene diminishes if other domestic companies can provide comparable capabilities, even without being perfect substitutes, it added.

On government involvement, it noted this assessment considers the extent of government ownership, any explicit obligations or stated commitments of support, and, to a lesser degree, reputational considerations related to a potential default.

However, for the domestic technology issuers covered in this report, government ownership is typically non-controlling. This weaker linkage between the government and the company generally reduces the likelihood of support, all else being equal.

As for profitability and leverage, S&P thinks these factors are less of a consideration from the government’s perspective on the likelihood of support.

But very high leverage and low profitability could reduce the government’s willingness or even capacity to support a company, it added.

“Although the potential for Chinese government support introduces risks such as overcapacity and reduced profitability, the likelihood of such support should also be factored into the credit risk considerations for these tech companies,” said Kurz.

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