The Chinese government has been trying, on and off, since the 1970s to build an indigenous semiconductor industry. But its ambitions have never been as high, nor its budgets so big, as they are now.

In an earlier big push, in the second half of the 1990s, the government spent less than $1 billion, reckons the U.S. bank Morgan Stanley.

This time, under a grand plan announced in 2014, the government will muster $100 billion to $150 billion in public and private funds.

The aim is to catch up technologically with the world's leading firms by 2030, in the design, fabrication and packaging of chips of all types, so as to cease being dependent on foreign supplies. In 2015, the government added a further target: Within 10 years it wants to be producing 70 percent of the chips consumed by Chinese industry.

It has a long way to go. Last year China's manufacturers consumed $145 billion worth of microchips of all kinds. But the output of China's domestic chip industry was only one-tenth of that value.

To help them achieve their dream, the authorities realize they must buy as much foreign expertise as they can lay their hands on. In recent months, state-owned firms and various arms of government have been rushing to buy, invest in or do deals with overseas microchip firms.

On Jan. 17, Guizhou province announced a joint venture with Qualcomm, a U.S. chip designer, to invest around $280 million in setting up a new maker of specialist chips for servers. The province's investment fund will own 55 percent of the business. Two days earlier, shareholders in Powertech Technology, a Taiwanese firm that packages and tests chips, agreed to let Tsinghua Unigroup, a state-controlled firm from the mainland, buy a 25 percent stake for $600 million.

Officials argue that developing a homegrown semiconductor industry is a strategic imperative, given the country's excessive reliance on foreign technology.

China's microchip trade gap is, by some estimates, only around half of what the raw figures suggest, since a sizable proportion of the imported chips that factories consume go into gadgets, such as Apple's iPhones and Lenovo's laptops, that are then exported.

Even so, a policy of promoting semiconductors fits with the government's broader policy of moving from labor-intensive manufacturing to higher-added-value, cleaner industries.

Morgan Stanley notes that profit margins for successful semiconductor firms are typically 40 percent or more, whereas the computers, gadgets and other hardware that they go into often have margins of less than 20 percent. So if Chinese firms designed and made more of the world's chips, and one day controlled some of the underlying technical standards, as Intel does with personal-computer and server chips, China would enjoy a bigger share of the global electronics industry's profits.

In the government's earlier efforts to boost domestic manufacturing of solar panels and LED lamps, it spread its largesse among a lot of local firms, resulting in excess capacity and slumping prices.

This time it seems to be concentrating its firepower on a more limited group of national champions. For instance, SMIC of Shanghai is set to be China's champion "foundry" (bulk manufacturer of chips designed by others). And HiSilicon of Shenzhen will be one of a few champions in chip design.

Most intriguing of all, Tsinghua Unigroup, a company spun out of Tsinghua University in Beijing, has emerged as the chosen champion among champions, a Chinese challenger to the mighty Intel. Zhao Weiguo, the firm's boss, started out herding goats and pigs in a remote province. After moving to Beijing to study at the university, he made a fortune in electronics, property and natural resources, before becoming chairman and second-largest shareholder (after the university itself) at Tsinghua Unigroup.

The company's emergence from obscurity began in 2013 when it spent $2.6 billion buying two Chinese chip-design firms, Spreadtrum and RDA Microelectronics. In 2014 Intel bought a 20 percent stake in its putative future rival, for $1.5 billion, as part of a plan for the two to work together on chips for mobile devices, an area in which Intel has lagged behind.

Last May, Tsinghua spent $2.3 billion to buy a 51 percent stake in H3C, a Hong Kong subsidiary of Hewlett-Packard that makes data-networking equipment. And in November, it announced a $13 billion share placement to finance the building of a giant memory-chip plant.

If China's putative chip champions are to succeed, they must accomplish three hard things. Lee Wai Keong, head of ASM Pacific Technology, a Hong Kong-listed supplier of equipment to the industry, believes that, first, Chinese firms must shift from "a culture of cost to a culture of innovation."

The second challenge is the need to shift to a global frame of mind. So far Chinese firms have been mostly catering to booming local consumption. But they must prepare for demanding global markets.

The final challenge may be the most daunting. Investors in China's chip firms need to get ready for a long, hard slog. Analysis by McKinsey reveals that across the global semiconductor industry, in memory or processor chips, and in design, fabrication or packaging, the top one or two firms in each area account for all profits — with the rest losing money.

China's efforts to develop national champions in what it calls "pillar industries" have a checkered record. In carmaking, its attempts to make foreign firms share their technology through compulsory joint ventures with domestic makers have only entrenched local firms' dependence on their foreign partners. In commercial aircraft, a state aerospace conglomerate, COMAC, has spent years, and huge sums, developing planes that are still not ready for the market, and will be outdated by the time they arrive.

Copyright 2013 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.