China’s largest-ever chip investment fund is expected to bolster Beijing’s support for the nation’s leading contract semiconductor manufacturers and other enterprises in the value chain, including equipment and material suppliers, according to analysts.
The third phase of the China Integrated Circuit Industry Investment Fund, also known as the “Big Fund”, was established last week with a registered capital of 344 billion yuan (US$47.5 billion) as part of the country’s efforts to build a self-sufficient semiconductor sector.
The fund is aimed at enhancing the nation’s “ability to supply [semiconductors] internally”, reinforcing Beijing’s goal to “build up the capability and strengths” of this industry, despite mounting US tech sanctions, Randy Abrams, the head of Taiwan research at Swiss investment bank UBS, said on Wednesday.
The new fund will be managed by Zhang Xin, an official at the Ministry of Industry and Information Technology, which is the principal agency overseeing China’s semiconductor industry. Zhang had replaced Ding Wenwu to oversee the Big Fund after the latter was put under investigation for possible corruption in July 2022.
Launched in 2014, the Big Fund had raised 204.1 billion yuan in 2019, up from its initial financing of 138.7 billion yuan. These two funding rounds highlighted investments in chip makers, with about 16 per cent earmarked in the first phase and 50 per cent in the second phase, according to calculations made by the South China Morning Post based on data from Qichacha.
But the jury is still out on whether China can overcome US tech restrictions, which have created “choking points” in the domestic semiconductor industry.
“It’s very challenging to see the gap narrowing because of export controls, which make it very difficult to get the right [chip-making] equipment to operate at the right production yields and cost,” Nicolas Gaudois, UBS head of Asia-Pacific technology research, said.
