China Forms Biggest-Ever Chip Investment Fund

China has launched its biggest-ever investment fund for the country’s domestic chip industry, valued at 344 billion yuan ($47.5bn, £37bn) as it continues its drive toward semiconductor self-sufficiency.

The third phase of the China Integrated Circuit Industry Investment Fund, known as the “Big Fund”, is comparable in size to the roughly $53bn in incentives under the US’ Chips and Science Act, passed in 2022, which the country is using to build up domestic chip manufacturing.

Its biggest investor is China’s Ministry of Finance, with a 17 percent stake and paid-in capital of 60bn yuan, according to Tianyancha, a Chinese business information firm.

The second-biggest shareholder is China Development Bank Capital with a 10.5 percent stake.

Chip investment

The fund includes 17 other investors, including five major Chinese banks: Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, and Bank of Communications, each of which is contributing about 6 percent of the capital.

The fund’s first phase was established in 2014 with a capital of 138.7bn yuan, followed by the second phase in 2019 with 204bn yuan.

The fund is a major investor in China’s two biggest chip manufacturers, Semiconductor Manufacturing International Corp (SMIC) and Hua Hong Semiconductor, as well as Yangtze Memory Technologies Corp (YMTC), a flash memory firm that competes with the likes of South Korea’s Samsung Electronics and SK Hynix.

One of the major areas of focus for the latest fund is to be the development of chip manufacturing equipment within China, in an effort to reduce the country’s dependence on gear from the likes of the Netherlands’ ASML.

Export controls

The Netherlands and Japan, under pressure from the US, have imposed export controls on chip-making equipment that bar sales of high-end gear to Chinese firms.

The US itself has also introduced multiple rounds of export controls targeting China’s chip industry, and particularly its capacity for manufacturing high-end chips, over national security concerns.