Daily Management Review

China Will Establish A $40 Billion Governmental Fund To Support The Chip Sector


China is getting ready to launch a new state-backed investment fund with the goal of raising approximately $40 billion for its semiconductor industry as the nation steps up attempts to catch up with the United States and other rivals, according to a report by Reuters quoting information from sources with knowledge of the situation,
The China Integrated Circuit Industry Investment Fund, often known as the Big Fund, opened three funds; this one is believed to be the largest.
In comparison, similar funds in 2014 and 2019 raised 138.7 billion yuan and 200 billion yuan, respectively, according to government reports. Its objective of 300 billion yuan ($41 billion) exceeds those years' totals.
According to one of the two persons and a third person with knowledge of the situation, one of the major investment areas will be machinery for chip fabrication.
For a long time, President Xi Jinping has emphasised how important it is for China to become self-sufficient in semiconductors. This need has grown even more urgent because Washington implemented a number of export control regulations over the past few years, citing concerns that Beijing would exploit cutting-edge technology to improve its military prowess.
In October, the United States unveiled a comprehensive package of penalties that restricted China's access to cutting-edge chip manufacturing machinery. U.S. allies Japan and the Netherlands also took similar action.
According to two of the people, Chinese authorities just approved the new fund.
According to one source, the Chinese finance ministry intends to provide 60 billion yuan. Other contributors weren't immediately identifiable.
Since the conversations were private, all of the sources declined to be named.
Reuters' requests for comment were not immediately answered by the State Council Information Office, which responds to media inquiries on behalf of the government, the finance ministry, or the Ministry of Industry and Information Technology.
Requests for comment from The Big Fund also did not receive a prompt response.
According to the first two sources, the fundraising process will probably take several months, and it is not yet known when the third fund will be formed or whether there will be any additional alterations to the plan.
The finance ministry and wealthy state-owned companies including China Development Bank Capital, China National Tobacco Corporation, and China Telecom supported the Big Fund's first two funds.
The two largest semiconductor foundries in China, Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, as well as flash memory manufacturer Yangtze Memory Technologies, a number of smaller businesses, and funds have all received funding from the Big Fund throughout the years.
Despite these investments, the Chinese chip sector has found it difficult to hold a dominant position in the global supply chain, particularly for cutting-edge semiconductors.
According to the three persons, the Big Fund is thinking of engaging at least two institutions to manage the capital of the new fund.
China's anti-graft bureau has been looking into a number of senior officials and former officials at SINO-IC Capital, the sole manager of the Big Fund's first two funds, since 2021.
Nevertheless, according to two of the persons, SINO-IC Capital is anticipated to continue serving as one of the third fund's managers.
An inquiry for comments was not immediately answered by SINO-IC Capital.
According to two of the persons, Chinese authorities have also contacted China Aerospace Investment, the investment division of the state-owned China Aerospace Science and Technology Corporation, to inquire about becoming one of the managers.
An inquiry for comment was not immediately answered by China Aerospace Investment.