China launches $47.5 billion chip fund to boost self-reliance

Promoting National Chip Industry Development

China has established the largest investment fund dedicated to semiconductors, known as Big Fund III, with a total capital of 344 billion yuan (47.5 billion dollars).
This initiative aims to promote the development of the domestic chip industry and achieve self-sufficiency in this highly strategic sector.

Government Support and Tensions with the US

This investment comes at a crucial time as the Chinese government is intensifying efforts to build its semiconductor industry, especially amidst increasing tensions with the United States.
The Biden administration has imposed strict restrictions on China’s ability to acquire advanced chips and chip production equipment, urging its allies to follow suit.

Impact on Chinese Chip Companies

Following the fund’s announcement, the stocks of major Chinese chip companies soared.
Semiconductor Manufacturing International Corp., China’s largest chip producer, saw an 8.1% increase, while Hua Hong Semiconductor Ltd.
surged over 10%.

Overview of Big Fund III

The China Integrated Circuit Industry Investment Fund’s third phase, Big Fund III, was officially established on May 24th.
The fund’s shareholders include the Chinese Ministry of Finance as the largest shareholder with a 17% stake and a paid-up capital of 60 billion yuan, and China Development Bank Capital as the second largest shareholder with a 10.5% stake.

Investors and Fund Phases

The fund has attracted seventeen other entities as investors, including five major Chinese banks.
The first phase was launched in 2014 with a registered capital of 138.7 billion yuan, followed by the second phase in 2019 with 204 billion yuan.
The fund has supported key chip manufacturers and equipment suppliers, emphasizing the production sector.

Future of China’s Semiconductor Industry

The investments aim to elevate China’s semiconductor industry to international standards by 2030, focusing on production, design, equipment, and materials.
Despite corruption scandals in the past, the fund reflects China’s ambition to become a global technology leader amid increasing US export controls.

Challenges and Global Ambitions

As tensions escalate, the fund serves not only as a defensive move against Western sanctions but also aligns with Xi’s vision to establish China as a global tech leader.
The competition between the two global powers is set to intensify in the semiconductor sector.

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