But one lawmaker on Friday warned of the impacts of possible sanctions, which he said could prevent the city from importing equipment it needed to produce the chips.

The Legislative Council’s Finance Committee gave the green light for the funding in a three-hour meeting, paving the way for the establishment of the microelectronics research and development institute, which would spearhead collaboration on third-generation semiconductors among universities, research and development centres, and the industry.

The committee also approved HK$10 billion to go towards the New Industrialisation Acceleration Scheme.

Yuen Long’s InnoPark will host the centre, which will house two pilot production lines for third-generation semiconductors.

Officials said the facility would allow start-ups as well as small and medium-sized companies to conduct trial runs before they began to commercialise their products.

The committee also heard the semiconductors could be used in the development of new energy vehicles and to enable renewable energy solutions.

But lawmaker Michael Tien Puk-sun of the Roundtable political group urged the government not to overlook the possible impacts of geopolitics, warning the US could further tighten export rules to curb access to cutting-edge chips and equipment.

“It is an election year in the United States. Have the authorities done any assessment over whether some of the equipment that we have to import from overseas for the setting up of the institute, such as the lithography system, could be banned by overseas countries?” Tien said.

Lithography equipment is critical in the chip-making process.

Secretary for Innovation, Technology and Industry Sun Dong said the pilot production lines would not use lithography equipment.

“The equipment that is needed is also not on any list of sanctions,” Sun said. “But we have to get the funding to start work without delay.”

The initiative was first announced in Chief Executive John Lee Ka-chiu’s policy address last year.

Sun said authorities hoped to turn the city into a regional leader in the development of microelectronics.

Under the New Industrialisation Acceleration Scheme approved in Friday’s meeting, companies in designated “industries of strategic importance” will be each provided with funding support of up to HK$200 million per project.

The companies will each need to invest at least HK$200 million to set up smart production facilities in the city, and can hire up to five overseas technical staff members.

Officials estimated the scheme could attract 50 to 100 enterprises to the city within five years.

Lawmaker Chow Man-kong urged the government to think of ways to retain both the companies and talent, saying: “Otherwise, they will just move to invest elsewhere after getting our funding support.”

Sun dismissed the worries, saying firms needed to set up factories and production facilities in the city.