China is gearing up to launch a substantial state-backed investment fund dedicated to boosting its semiconductor sector, with ambitions to raise around $40 billion in funding. This move is part of China’s ongoing efforts to bridge the technological gap with the United States and other global competitors in the semiconductor industry.
This new investment initiative is set to be the largest of the three funds operated by the China Integrated Circuit Industry Investment Fund, commonly known as the Big Fund. To put this into perspective, its target funding of 300 billion yuan ($41 billion) surpasses the amounts raised by similar funds in 2014 and 2019, which reportedly secured 138.7 billion yuan and 200 billion yuan, respectively.
The primary focus of this investment endeavor will be directed towards acquiring advanced equipment for semiconductor manufacturing, a critical aspect of semiconductor production. This strategic push is in line with President Xi Jinping’s longstanding emphasis on achieving self-sufficiency in semiconductor technology. The urgency has grown further as the United States has imposed a series of export control measures over the past few years, citing concerns that China could employ advanced chips to bolster its military capabilities. In a significant move in October, the U.S. implemented sweeping sanctions that restricted China’s access to advanced chipmaking equipment, with Japan and the Netherlands subsequently taking similar actions.
The approval of this new fund has come from Chinese authorities in recent months, according to insiders. The Chinese Ministry of Finance is expected to contribute 60 billion yuan to the fund, but other contributors have not been disclosed at this time. Due to the confidential nature of these discussions, all sources have opted to remain anonymous.
Several government bodies, including the State Council Information Office, the Ministry of Finance, and the Ministry of Industry and Information Technology, have not yet responded to requests for comments or clarification regarding this initiative. Similarly, the Big Fund itself has not issued any public statements on the matter.
The fundraising process for this ambitious project is expected to take several months, and details about the launch date of the third fund or any potential alterations to the plan remain unclear. In the past, backers of the Big Fund’s previous two rounds included the Ministry of Finance and state-owned entities like China Development Bank Capital, China National Tobacco Corporation, and China Telecom.
Despite previous investments from the Big Fund, China’s semiconductor industry has encountered challenges in establishing itself as a dominant player in the global supply chain, especially in the realm of advanced chips.
Regarding the management of this new fund, there are discussions about bringing in at least two institutions to oversee its capital deployment. It’s worth noting that SINO-IC Capital, the sole manager for the first two funds operated by the Big Fund, has faced scrutiny from China’s anti-graft authority since 2021. Nevertheless, it is anticipated that SINO-IC Capital will continue to be involved in managing the third fund. Chinese officials have also been in contact with China Aerospace Investment, the investment arm of the state-owned China Aerospace Science and Technology Corporation, to explore the possibility of their participation as fund managers.
China’s commitment to bolstering its semiconductor industry is evident in its plans to launch a significant investment fund. With the aim of raising $40 billion, this fund underscores China’s determination to close the technological gap with its global rivals in this critical sector. However, the success of this initiative will depend on various factors, including international dynamics and the evolving semiconductor landscape.