SK Group is said to invest in a newly established fund aimed at supporting their entry into the Chinese market. The fund, reported by Bloomberg on August 21 (local time), is a joint venture between SL Capital, a private equity fund established by SK Group and Beijing-based Legend Capital, and the authorities of Wuxi City in eastern China. The fund is valued at 1 billion yuan, approximately 187.4 billion won (approximately $138.8 million).

The agreement to establish this fund was finalized on August 20 with SL Capital planning to raise investment funds through a joint venture with Wuxi Industry Development Group Co., which is supported by the local government. According to SL Capital’s official WeChat account, the fund is already investing in Chinese semiconductor companies, including AI chip manufacturer Black Sesame International Holdings.

Wuxi City authorities have stated that the establishment of this fund aims to support leading companies in South Korea’s semiconductor supply chain to start businesses locally. “The fund’s founders have been cooperating to attract South Korean semiconductor equipment companies, Nextin and Gigalane, to Wuxi City,” they added.

Nextin, a South Korean semiconductor equipment company, confirmed to Bloomberg that it has been proceeding with the process of establishing a factory in Wuxi after signing a preliminary agreement with local authorities in August last year. Meanwhile, Gigalane announced in June that it would establish a subsidiary specializing in semiconductor equipment in Wuxi to enter the Chinese power semiconductor market. However, Bloomberg noted that it had made several requests for comments from Gigalane but received no response.

In a statement to Bloomberg, SK Group clarified its role in the fund, stating, “Although the fund was established by SL Capital in collaboration with Legend Capital, it is operated by SL Capital, and SK Group is not directly involved in the fund’s management.” They further emphasized that SL Capital has no connection with SK Hynix’s semiconductor investments. SK Hynix, a subsidiary of SK Group, operates semiconductor plants in Wuxi, Chongqing, and Dalian but does not produce AI memory chips in China.

The backdrop of this investment is the ongoing U.S.-China trade tensions, particularly concerning technology and intellectual property. The U.S. has been pressuring its allies to restrict the export of advanced technology to China to limit China’s technological advancements and maintain a competitive edge. Despite this, South Korea, a major player in the global semiconductor industry, continues to seek opportunities in the Chinese market.

China’s ambitions to become self-sufficient in semiconductor production have led to significant investments by the Chinese government in its semiconductor industry. The involvement of Wuxi City authorities in the fund highlights the local government’s efforts to attract and support foreign semiconductor companies.

The geopolitical implications of South Korean companies investing in China amid U.S. pressure are significant. Such investments might affect international relations and the strategic positioning of South Korea between the U.S. and China.