China Sets Up $40 Billion State-Backed Fund to Boost Semiconductor Industry
HONG KONG/BEIJING, Sept 5 (Reuters) – China is planning to launch a new state-backed investment fund with the aim of raising approximately $40 billion for its semiconductor sector, according to two sources familiar with the matter. This move comes as China intensifies its efforts to catch up with the United States and other competitors in the global semiconductor market.
The fund, known as the China Integrated Circuit Industry Investment Fund or the Big Fund, is expected to be the largest of the three funds launched by the organization. Its target of 300 billion yuan ($41 billion) surpasses the amounts raised by similar funds in 2014 and 2019, which amounted to 138.7 billion yuan and 200 billion yuan, respectively, according to government reports.
One of the main areas of investment for the fund will be the procurement of chip manufacturing equipment, as stated by one of the sources. This move comes after the United States imposed a series of export control measures, limiting China’s access to advanced chipmaking equipment. Japan and the Netherlands have also implemented similar restrictions.
President Xi Jinping has repeatedly emphasized the importance of achieving self-sufficiency in semiconductors for China. The need for such self-reliance has become more urgent due to concerns that Beijing could leverage advanced chips to enhance its military capabilities.
The approval for the new fund was obtained from Chinese authorities in recent months, according to the two sources. While one source revealed that China’s finance ministry plans to contribute 60 billion yuan to the fund, the identities of other contributors remain undisclosed.
However, the fundraising process is expected to take several months, and it remains uncertain when the third fund will be launched and if any modifications will be made to the plan, according to the sources.
Past beneficiaries of the Big Fund’s investments include the semiconductor companies Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor, as well as flash memory maker Yangtze Memory Technologies. Despite these investments, China’s chip industry has struggled to establish itself as a leading player in the global supply chain, particularly in the field of advanced chips.
The Big Fund is currently exploring the possibility of hiring at least two institutions to manage the capital of the new fund, according to the sources. It is worth noting that senior officials and former officials at SINO-IC Capital, the sole manager of the Big Fund’s first two funds, have been under investigation by China’s anti-graft authority since 2021. However, SINO-IC Capital is expected to remain as one of the managers for the third fund, according to the sources.
Chinese officials have also reached out to China Aerospace Investment, the investment arm of state-owned China Aerospace Science and Technology Corporation, to discuss its potential role as one of the fund’s managers, the sources said.
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