China doubles down on Big Fund with US$47.5 billion third phase

China doubles down on Big Fund with US$47.5 billion third phase

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By Peter Clarke

China has launched its third and largest semiconductor investment fund with 344 billion yuan (about US$47.5 billion), according to reports.

The move shows China doubling down on its aspiration to achieve a world-class position and self-sufficiency in semiconductors while the US has been imposing export restrictions that limit China’s development. The fund is nearly twice the size of phase two of the Big Fund launched in 2019.

As well as supporting fabless chip companies, foundry chip manufacturers the third-phase of the fund is expected to focus on chipmaking equipment, an area where China’s dependence on the US and the Netherlands has allowed export controls to hurt.

China’s finance ministry is the biggest shareholder with a 17 percent stake. About 19 other investors include various state-owned banks and enterprises and local government authorities including those in Shenzhen and Beijing. The fund was incorporated on May 24.

Every five years

The China Integrated Circuit Industry Investment Fund, otherwise known as the Big Fund was first established in 2014 with 100 billion yuan (about US$14 billion) in funds. The fund was aimed at bolstering China’s semiconductor industry by backing chip startups and R&D. The “scattergun” approach was later criticised for being subject to waste and fraud.

The second phase of the China Big Fund, was officially incorporated on October 22, 2019, with capital of 204.15 billion yuan (about US$29 billion at the time). This fund was also focused on startups, but also on fostering scale-ups and on chip manufacturing capabilities. Foundries such as SMIC and Hua Hong reportedly both benefitted from the fund.

China sustained a phenomenal increase in startup acitivity over the period 2020 to 2023.

In 2022, Big Fund General Manager Ding Wenwu and several other executives came under investigation by the country’s corruption watchdog in July 2022 (see Another China ‘Big Fund’ executive is detained).

Related links and articles:

Huawei builds R&D base for home-grown lithography

Report: Huawei, Shenzhen support creation of local foundry

China’s Big Fund invests yet more billions in memory firms

Ministry official to lead China’s troubled ‘Big Fund’

Another China ‘Big Fund’ executive is detained

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