China Launches New Fund To Boost Chip Self-Sufficiency Amid US Tensions

China is doubling down on its efforts to achieve self-sufficiency in chip technology by launching a third state-backed investment fund. This move comes amid ongoing tensions with the United States, which has imposed export controls on certain chip-making technologies.

Big Fund Gets Bigger

The newly established fund, officially named the third phase of the China Integrated Circuit Industry Investment Fund (aka “Big Fund”), boasts a significant war chest of 344 billion yuan (around $47.5 billion). Registered in Beijing, this phase is the largest of the three funds launched so far.

Who’s Behind the Money?

China’s Ministry of Finance leads the pack of investors with a 17% stake (60 billion yuan), followed by China Development Bank Capital at 10.5%. Notably, five major Chinese banks each contribute around 6% of the total capital, demonstrating broad domestic support for the initiative.

Positive Market Reaction

Chinese chip stocks responded positively to the news. The CES CN Semiconductor Index jumped over 3%, marking its strongest single-day performance in over a month. This follows similar positive market reactions to the first two phases of the Big Fund launched in 2014 and 2019, respectively.

Past Success and Future Focus

The Big Fund has a history of supporting key players in China’s chip industry, including the country’s two largest chip foundries, Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor. It has also funded flash memory maker Yangtze Memory Technologies and several smaller chip-related companies and investment funds.

According to Reuters, the third phase will prioritize investments in equipment used for chip manufacturing. The Big Fund is also considering partnering with multiple institutions to manage the substantial capital injection.

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