China Builds Third Fund Of $47.5B To Support Semiconductor Sector

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China sets up its third planned state-backed fund worth $47.5B to bolster the country’s domestic chip industry to achieve next level of self-sufficiency.

On May 24, the third stage of the China Integrated Circuit Industry Investment Fund was officially inaugurated. It is now registered with the Beijing Municipal Administration for Market Regulation. This phase, also referred to as the ‘Big Fund’ is the largest ever among the three phases that were launched in 2014 and 2019 respectively. It has a registered capital of 344 billion yuan, which is equivalent to $47.5 billion according to the files. 

China’s Ministry of Finance is the leading shareholder with a 17% stake in this fund, followed by a subsidiary with 10% of the state-owned National Development Bank. An investment enterprise under the Shanghai municipal government holds 9%, alongside other state-owned agencies.

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Although specific investment targets have not been disclosed yet, this fund is expected to concentrate on AI-based semiconductors and manufacturing equipment. It has provided financial support to China’s largest chip foundries, Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, as well as flash memory manufacturers Yangtze Memory Technologies and several smaller organisations. The Big Fund is also planning to hire at least two institutions to invest the capital from the third phase. 

China is already the world’s largest semiconductor market in terms of consumption. Besides, it is rapidly expanding its chip production, which remarkably surged by 40% in the first quarter of this year. A report published by the International Semiconductor Industry Association (SEMI) last year suggested that China’s portion of global semiconductor capacity is poised to grow further. This growth will be backed by increased funding from local governments and other incentive initiatives. In this scenario, this fund will largely sponsor the flourishing chip-making sector of China.

According to Reuters, the situation to establish the fund gained increased urgency following the implementation of several export control measures by the U.S. This substantial investment clearly highlights President Xi Jinping’s push to attain self-sufficiency in China’s semiconductor technology.  

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