Newly allocated direct state assistance amounting to approximately USD 40 billion is set to be dispersed to Chinese companies in the near future. This financial support falls under the umbrella of the third phase of aid from the National Integrated Circuit Industry Investment Fund program, also known as Big Fund III. The funding is anticipated to originate from various sources, including local governments and state-owned enterprises.
The forthcoming Big Fund III aims to provide financial aid to over 100 Chinese semiconductor firms, with notable mentions such as contract manufacturer SMIC and NAND manufacturer YMTC. Companies operating in sectors where the United States has imposed strict export restrictions, such as DRAM manufacturer CXMT, as well as those in areas where China lags behind, like lithography equipment and photomasks, will also benefit from this support.
True to its name, Big Fund III represents the third iteration of this initiative, with the previous installments having allocated around $20 billion and $30 billion, respectively, to bolster domestic semiconductor manufacturing in China. The inception of the Big Fund dates back to 2014, primarily aimed at fostering the growth of domestic semiconductor production in the nation.
The limited success of Big Fund I and Big Fund II in achieving China's envisioned outcomes became apparent by 2022, prompting corruption probes against the leadership of the fund. In 2022, Ding Wenwu, the fund's key manager, faced allegations of "serious legal breaches," resulting in thorough disciplinary investigations, as reported by Reuters.
In the spring of 2023, Zhang Xin took over from Ding, marking a pivotal leadership change that seemingly paved the way for China to reinvest significantly in its semiconductor sector within the following year. In 2023, China's semiconductor sector reduced its semiconductor imports to $349 billion, marking a 20 percent decline from the nearly $420 billion in 2021. The domestic sales of domestically manufactured semiconductors reached a historic high of US$180 billion in 2023.
China aims to achieve a milestone by 2035, striving to domestically produce 70 percent of the necessary semiconductor manufacturing equipment within its borders. Currently, this self-sufficiency stands at approximately 20 percent, with the Netherlands and ASML being key suppliers of lithography equipment. According to reports from Digitimes, Semicon China highlighted a global semiconductor equipment market decrease of 2 percent in 2023, contrasting with a notable 28 percent surge in sales to China.
