semiconductor

New Beijing chip fund adds US$1.2 billion to semiconductor coffers in China

desk 30 August 2024

The Beijing municipal government has set up a new semiconductor investment fund, as China ramps up support for its chip industry amid intensified trade tensions with the US.

The state-owned Zhongguancun Development Group established the Beijing Integrated Circuit Industry Investment Fund on Tuesday with a registered capital of 8.5 billion yuan (US$1.2 billion), according to information available on Chinese corporate database Qichacha.

The Beijing government started the Zhongguancun firm in 2010, and the fund will be run by a subsidiary registered as Beijing Zhongguancun Capital Fund Management, according to Qichacha.

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The new fund in Beijing joins a slew of initiatives from local Chinese governments aimed at bolstering the country’s chip sector. The most notable among them is the China Integrated Circuit Industry Investment Fund, a national effort known as the “Big Fund”.

China in May set up the third phase of the Big Fund with a registered capital of 344 billion yuan, making it the country’s largest-ever chip investment fund, nearly on par with the US$53 billion in incentives under the Chips and Science Act signed into law by US President Joe Biden in 2022.

Analysts expect the Big Fund III to be a boon for companies across the country’s semiconductor supply chain, including equipment and material suppliers, and make investments related to advanced packaging.

Government subsidies for semiconductor firms in China have surged as Beijing doubles down on its self-sufficiency drive. Public funding to 25 of the country’s top chip companies jumped 35 per cent to 20.53 billion yuan last year over 2022, according to an analysis by the Post.

Massive state subsidies have contributed to the growth of China’s semiconductor industry, but have also led to an overcapacity in production, according to a report published earlier this month by the Information Technology and Innovation Foundation (ITIF), a Washington-based think tank.

Meanwhile, Semiconductor Manufacturing International Corporation, China’s largest chip foundry, still lags behind Taiwan Semiconductor Manufacturing Company (TSMC) by five years, ITIF said. TSMC is responsible for manufacturing an estimated 90 per cent of the world’s most advanced chips.