China Launches $47.5 Billion Semiconductor Fund to Boost Industry Amid US Tensions

China has set up the country’s largest-ever semiconductor investment fund, known as Big Fund III, to boost the development of the domestic chip industry. With a massive 344 billion yuan ($47.5 billion) amassed from the central government, state-owned banks, and enterprises, including Industrial & Commercial Bank of China Ltd., this fund signals a significant push from Beijing towards achieving self-sufficiency in semiconductor production amidst escalating tensions with the US.

The Biden administration’s restrictions on China’s access to advanced chips and chipmaking equipment have prompted China to increase its investments in this crucial sector. The latest fund aims to support local chipmakers and build up China’s own semiconductor industry.

Shares of major Chinese chip stocks surged following the announcement of the fund, with companies like SMIC and Hua Hong Semiconductor seeing significant increases in their stock prices.

The fund’s largest shareholder is China’s Ministry of Finance, with contributions also coming from investment firms owned by local governments in Shenzhen and Beijing. The fund aims to support chipmaking plants in Guangdong province, with the goal of reducing reliance on imported components due to US sanctions on companies like Huawei.

The global semiconductor race has intensified, with the US and the European Union allocating significant funding towards semiconductor development. China’s proactive industrial policy, including initiatives like Made in China 2025, has positioned the country as a major player in the semiconductor industry.

While China has made substantial investments in semiconductor technology over the past decade, not all efforts have been successful. The newly created Big Fund III aims to provide funding for projects focused on advanced chip development and manufacturing.

As the US continues to implement measures to slow China’s technological progress, China is doubling down on investments in chipmaking capabilities. The establishment of Big Fund III underscores China’s determination to build a robust semiconductor industry and reduce reliance on foreign technology.