China is poised to launch a new state-backed investment fund worth approximately $40 billion to support its semiconductor sector. This move comes as part of the country's efforts to catch up with rivals like the U.S. The fund, likely to be the largest among three funds launched by the China Integrated Circuit Industry Investment Fund, or the Big Fund, aims to accelerate the development of the semiconductor industry in China.
The target of the fund, set at 300 billion yuan ($41 billion), surpasses the amounts raised by similar funds in 2014 and 2019, which were 138.7 billion yuan and 200 billion yuan, respectively, according to government reports. The fund will primarily focus on investing in chip manufacturing equipment, according to sources familiar with the matter.
President Xi Jinping has consistently emphasized the need for China to achieve self-sufficiency in semiconductors. This urgency has heightened after the United States imposed export control measures, citing concerns that China could exploit advanced chips to enhance its military capabilities. Subsequently, China faced restrictions on accessing advanced chipmaking equipment when the U.S. introduced comprehensive sanctions. Similar steps were taken by U.S. allies Japan and the Netherlands.
Chinese authorities approved the establishment of the new fund in recent months. The country's finance ministry is planning to contribute 60 billion yuan, while other contributors remain unknown.
The fundraising process is expected to take several months, and details regarding the launch of the third fund or potential modifications to the plan are not immediately available. The Big Fund's previous two funds received support from entities like the finance ministry, China Development Bank Capital, China National Tobacco Corporation, and China Telecom. The Big Fund has provided financial assistance to major chip foundries like Semiconductor Manufacturing International Corporation (SMIC), Hua Hong Semiconductor, Yangtze Memory Technologies, and several smaller companies and funds.
To manage the capital of the new fund, the Big Fund is considering hiring at least two institutions. While SINO-IC Capital, the sole manager of the first two funds, remains under investigation by China's anti-graft authority, it is expected to continue managing the third fund. Chinese officials have also approached China Aerospace Investment, the investment arm of state-owned China Aerospace Science and Technology Corporation, to discuss its role as one of the fund managers.
China's launch of a state-backed investment fund, slated to be worth $40 billion, manifests its commitment to fortify the semiconductor sector. This endeavor aims to enhance China's chip industry and reduce reliance on foreign suppliers, particularly in advanced chip technologies, aligning with President Xi's emphasis on semiconductor self-sufficiency.
