China to Launch $40 Billion State-Backed Fund to Boost Semiconductor Sector
China is preparing to unveil a new state-backed investment fund with the goal of raising approximately $40 billion to support its semiconductor industry. This move is part of China’s broader efforts to catch up with the United States and other global rivals in the field of chip manufacturing.
The fund is expected to be the largest among the three funds established by the China Integrated Circuit Industry Investment Fund, commonly known as the Big Fund. Its ambitious target of 300 billion yuan ($41 billion) exceeds the amounts raised by similar funds in 2014 and 2019, which raised 138.7 billion yuan and 200 billion yuan, respectively, according to government reports.
One of the primary areas of investment for the new fund will be semiconductor manufacturing equipment, as indicated by sources familiar with the matter. This move aligns with President Xi Jinping’s emphasis on achieving self-sufficiency in semiconductor production, particularly in light of export control measures imposed by the U.S. in recent years due to concerns about China’s military applications of advanced chips.
The approval for this new fund was granted by Chinese authorities in recent months, according to insiders. While the Ministry of Finance plans to contribute 60 billion yuan, the identities of other contributors remain undisclosed.
The fundraising process is expected to span several months, and the exact launch date for the third fund, as well as potential modifications to the plan, are yet to be determined.
Previous backers of the Big Fund include the finance ministry and state-owned entities like China Development Bank Capital, China National Tobacco Corporation, and China Telecom. The Big Fund has previously provided funding to major Chinese chip foundries and semiconductor companies.
Despite previous investments, China’s semiconductor industry has faced challenges in becoming a leading player in the global supply chain, particularly in the production of advanced chips.
The management of the new fund is under consideration, with at least two institutions expected to be hired for this purpose. SINO-IC Capital, the manager of the first two Big Fund funds, is likely to continue its involvement in managing the third fund, despite ongoing investigations into several of its senior officials by China’s anti-graft authority.
Additionally, Chinese officials have explored the possibility of China Aerospace Investment, the investment arm of the state-owned China Aerospace Science and Technology Corporation, being one of the fund managers.
As discussions surrounding the fund’s launch and management are confidential, the sources requested anonymity. Neither the State Council Information Office, the finance ministry, the Ministry of Industry and Information Technology, nor the Big Fund provided immediate responses to Reuters’ requests for comments.
