China is gearing up to launch a state-supported investment fund to inject approximately $40 billion into its semiconductor industry, marking a heightened effort to narrow the gap with the U.S. and other competitors in the tech sphere.
This initiative comes as the largest of the three from the China Integrated Circuit Industry Investment Fund, commonly referred to as the Big Fund, according to a report from Reuters.
This ambitious endeavor, aiming to amass 300 billion yuan (roughly $41 billion), surpasses its predecessors in 2014 and 2019, which garnered 138.7 billion yuan and 200 billion yuan, respectively.
Industry insiders suggest that a significant portion of this fund will be allocated towards equipment essential for chip production.
“President Xi Jinping has long stressed the need for China to achieve self-sufficiency in semiconductors,” highlighting the urgency of the situation.
The U.S., in a move last October, initiated a comprehensive sanctions package restricting China’s access to sophisticated chip-making equipment.
This action was paralleled by U.S. allies like Japan and the Netherlands, raising concerns that cutting-edge chips might be employed to enhance China’s military prowess.
According to reliable sources, the blueprint for this fund received the green light from Chinese regulatory bodies in the recent past.
It’s anticipated that the Chinese finance ministry will pledge a sum of 60 billion yuan to this cause.
The identities of other potential investors remain undisclosed at this time.
Although the specifics of the fundraising timeline are still under wraps, historical patrons of the Big Fund have included financial heavyweights such as China Development Bank Capital, China National Tobacco Corporation, and China Telecom, the Reuters report notes.
Over the course of its operations, the Big Fund has channeled investments into leading Chinese chip foundries, notably the Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, alongside other emergent players in the domain.
However, despite substantial financial backing, China’s semiconductor sector has yet to secure a dominant position in the global market, particularly in the arena of advanced chips.
As the Big Fund sets its sights on this massive investment, it’s reportedly in talks with at least two institutions to oversee the capital’s deployment.
Notably, some top-tier executives from SINO-IC Capital, which previously managed the Big Fund’s initial two funds, have faced scrutiny from China’s anti-corruption unit since 2021.
Nevertheless, insiders believe that SINO-IC Capital is poised to remain in a managerial role for this upcoming fund.
Simultaneously, conversations have ensued with China Aerospace Investment, an offshoot of the state-run China Aerospace Science and Technology Corporation, regarding potential management roles.
Responses from both SINO-IC Capital and China Aerospace Investment are still pending.
