China is getting set to launch a new state-backed investment fund with the aim of generating around $40 billion for its semiconductor industry as the country speeds up attempts to catch up with the United States and other rivals, according to two people with knowledge of the situation.
The Chinese 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 emphasized 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.
According to one source, the Chinese finance ministry intends to provide 60 billion yuan. Additional contributors weren’t immediately identifiable.
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.
Chinese Semiconductor Funding
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 Company, and China Telecom supported the Big Fund’s first two funds.
A number of smaller companies and funds, as well as the two biggest semiconductor foundries in China, Semiconductor Manufacturing International Company and Hua Hong Semiconductor, flash memory producer Yangtze Memory Technologies, and others, have all benefited from funding from the Big Fund over 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.
Yet, 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.
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