China is expected to tackle challenges ahead in trying to develop the latest generation of semiconductors as souring tensions with the United States translate into blocked access to key components supplied from American firms.

Beijing is planning to put forward a raft of government policies to support the research, financing and development of third-generation semiconductors, according to a report by Bloomberg on Thursday, citing anonymous sources.

Bloomberg reported that the new policies were included in a draft of the country’s next five-year plan, China’s policy blueprint that laid out key economic and political goals. The 14th five-year plan covers the period from 2021 to 2025.

Third-generation semiconductors are made with gallium nitride and silicon carbide, which are widely used in consumer and industrial electronics and are said to be crucial in electric vehicles, smart grid technology and military applications.

The latest generation has superior performance compared with the first and second-generation semiconductors, which are made with traditional silicon-based materials, because of its higher voltage and temperature resistance.

However, worsening bilateral relations will hamper China’s efforts to develop a homegrown semiconductor industry in the short run because of its heavy reliance on American-made chips and other components to manufacture third-generation semiconductors, experts say.

The first challenge would be to try to avoid American software, but that would be difficult because the U.S. had long dominated the field, said Vincent Lau, chair professor of the Hong Kong University of Science and Technology’s department of electronic and computer engineering.

Nevertheless, Lau was hopeful that while China would definitely be unable to catch up with U.S. technology in one to two years, the country might succeed in research and development in the long run.

The Chinese could start sourcing chips from other regions such as Japan and Korea to reduce their dependence on American technology although difficulties would be expected in the short run, said Frederick Wong, founder and chief investment officer of hedge fund eFusion Capital.

China’s technological development could be facing headwinds after Washington last month announced sanctions prohibiting any foreign semiconductor company from selling chips made using U.S. technology to Chinese telecommunications giant Huawei unless they obtained a license to do so. The U.S. government had also recently banned Chinese messaging and social media platforms WeChat and TikTok from operating in the country, citing threats to national security.

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