China is launching a new state-supported investment fund to inject about $40 billion into its semiconductor sector. This is an attempt to bridge the technological gap with the U.S. and other global competitors.
This new initiative will likely be the largest among three funds created by the China Integrated Circuit Industry Investment Fund, or the “Big Fund”.
The proposed 300 billion yuan ($41 billion) surpasses its predecessors from 2014 and 2019, which accumulated 138.7 billion yuan and 200 billion yuan respectively.
A significant portion of the fund will be directed towards equipment crucial for chip manufacturing.
China’s urgency to be self-reliant in the semiconductor domain has been consistently emphasized by President Xi Jinping.
This drive gained momentum after the U.S., expressing concerns over the military application of advanced chips by China, enforced export restrictions.
Following the U.S., countries like Japan and the Netherlands have also curbed China’s access to cutting-edge chipmaking tools.
Recent months saw the approval of this new fund by the Chinese authorities.
While the finance ministry of China intends to contribute 60 billion yuan, the identities of other potential contributors remain undisclosed.
Despite past substantial investments, China’s semiconductor sector hasn’t dominated the global arena, particularly in advanced chip technologies.
The Big Fund has historically supported giants like Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, along with several smaller entities.
It’s expected that the funding process will span several months, with uncertainty regarding the exact launch date of this third fund or potential adjustments to its blueprint.
Past supporters of the Big Fund include influential state-owned organizations like China Development Bank Capital and China Telecom.
The Big Fund is now in talks to employ at least two institutions to manage the fresh capital. Notably, SINO-IC Capital, the exclusive manager for the earlier two funds, has been under scrutiny since 2021.
However, they are anticipated to manage this new fund.
Additionally, officials have engaged with China Aerospace Investment for potential management duties.
Both SINO-IC Capital and China Aerospace Investment have yet to comment on these developments.
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