China’s launch of its largest-ever semiconductor investment fund marks a pivotal moment in the nation’s drive for technological self-sufficiency. On May 24, China announced that Big Fund III, the third phase of the National Integrated Circuit Industry Investment Fund, has amassed a staggering RMB 344 billion (USD 47.5 billion) to bolster its domestic chip industry.
The fund drew contributions from 19 investors, including the central government, state-owned banks, and enterprises. Leading the initiative is China’s Ministry of Finance, which holds a 17.4% stake.
This colossal financial push underscores President Xi Jinping’s determination for China to achieve self-sufficiency in science and technology. Part of this drive stems from the US tightening its grip on technology exports to China, citing national security concerns. The Biden administration’s restrictions on advanced chips and chipmaking equipment have intensified the global race for semiconductor supremacy. Eager not to be left behind, China is responding with the latest fund to support local chipmakers and reduce reliance on foreign technology.
China’s proactive stance is not new. Since the unveiling of the “Made in China 2025” initiative, the country has aggressively funded its semiconductor sector, with previous phases of the National Integrated Circuit Industry Investment Fund supporting key projects and companies like Semiconductor Manufacturing International Corporation (SMIC), Hua Hong Semiconductor, and Advanced Micro-Fabrication Equipment (AMEC).
However, previous phases of the fund have been marred by corruption scandals and inefficiencies. The fund has faced criticism before for its lack of transparency and accountability, operating primarily behind the scenes. Past investigations into alleged graft involving fund officials have also raised concerns about the effective use of these massive investments. Despite these issues, the fund has been instrumental in buoying market confidence and driving China’s semiconductor ambitions forward.
Big Fund III will focus on investments in chip manufacturing equipment and the development of less-advanced chipmaking capabilities, crucial for building a robust domestic supply chain. By fostering innovation and supporting companies like Huawei, China aims to mitigate the impact of US export controls and advance its semiconductor industry.