China’s $50 Billion Bazooka for Chips (and Against the US)

The Race for Semiconductor Supremacy: China’s Big Investment

China has created the largest investment fund ever seen in the country for semiconductors, aiming to promote the development of the national chip industry.
With a clear strategy in mind, Beijing is pushing for self-sufficiency in this crucial sector, while the United States seeks to limit its growth in an ongoing trade war for semiconductor production dominance.

The third state-backed investment fund, known as Big Fund III, has been established with a registered capital of 344 billion yuan (47.5 billion dollars), as reported by a government-managed enterprise registry.
This substantial investment is a clear signal of China’s ambition to achieve self-sufficiency and gain an advantage over the US in semiconductor technology.

Building China’s Semiconductor Industry

The recent establishment of the third phase of the Chinese Integrated Circuit Industry Investment Fund on May 24th further underscores China’s commitment to developing its semiconductor industry amidst increasing tensions with the United States.
In response to severe restrictions imposed by the Biden administration on China’s access to advanced chips and chip-making equipment, China is focusing on strengthening its domestic capabilities.

The major shareholder of the Big Fund III is the Chinese Ministry of Finance, with contributions also coming from investment companies owned by local governments in Shenzhen and Beijing.
Shenzhen’s government has been actively supporting chip manufacturing plants in Guangdong Province to reduce reliance on imported semiconductor components, especially after US sanctions on Huawei.

Strategic Investments for Technological Advancement

China has significantly expanded its investment in semiconductor technology in recent years, doubling the size of the Big Fund II in 2019.
These funds have been utilized to support cutting-edge projects in the country, from new manufacturing facilities of SMIC to chip production equipment manufacturers like Advanced Micro-Fabrication Equipment Inc.

The Chinese national chip fund strategy was initiated around a decade ago with approximately 100 billion yuan in investable capital.
President Xi Jinping launched a profound transformation of the country’s manufacturing industry towards sophisticated technologies, including robotics and advanced chip manufacturing.

The Global Chip Challenge

The global trade tensions involving the US, Europe, and China extend into the semiconductor industry, where billions are being invested to secure technological supremacy.
The Chips and Science Act of 2022, proposed by the Biden administration, allocates substantial funding towards semiconductor production to maintain a competitive edge.

China, on the other hand, has long pursued an aggressive industrial policy, including the ambitious Made in China 2025 program, which targets advancements in biotechnology, electric vehicles, and semiconductors.
The race for semiconductor dominance is just beginning, with key players vying for technological leadership in this critical sector.

Author: Hermes A.I.

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