China launches $40 billion semiconductor investment fund. China is gearing up to unleash a groundbreaking initiative by launching a new state-backed investment fund with a lofty goal – to raise approximately $40 billion dedicated to propelling its semiconductor industry to new heights. This ambitious endeavor is part of the larger China Integrated Circuit Industry Investment Fund, commonly known as the “Big Fund,” and it is poised to emerge as the most substantial among the three funds established by this program.
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The Ascent of the Big Fund
China’s semiconductor ambitions have never been more pronounced, as the nation seeks to assert its dominance in this critical sector. The target fundraising amount of $41 billion represents a significant leap forward, eclipsing the previous funding efforts in 2014 and 2019, which yielded 138.7 billion yuan and 200 billion yuan, respectively.
Nurturing Self-Sufficiency
One of the pivotal objectives of this substantial investment will be to procure cutting-edge equipment for semiconductor manufacturing. Chinese President Xi Jinping has underscored the paramount importance of achieving self-sufficiency in semiconductor production, especially in light of export control measures imposed by the United States. This move aims to mitigate the disruptions caused by international trade tensions and secure China’s technological independence.
Government Backing
This groundbreaking fund has received the official seal of approval from Chinese authorities, and the nation’s finance ministry has pledged to contribute a substantial sum of 60 billion yuan to this monumental undertaking. However, details about the identities of other contributors beyond the finance ministry have remained confidential, shrouded in secrecy amid discussions surrounding the fund.
The Road Ahead
The fundraising process is expected to span several months, and specifics regarding the launch date of the third fund or potential modifications to the plan remain shrouded in uncertainty. Past backers of the Big Fund’s initiatives have included not only the finance ministry but also various state-owned entities, such as China Development Bank Capital, China National Tobacco Corporation, and China Telecom.
Ongoing Challenges
Despite previous investments, China’s semiconductor industry has encountered formidable challenges in its quest to ascend as a global supply chain leader, particularly in the realm of advanced chip production. The Big Fund is exploring the possibility of enlisting at least two institutions to oversee the management of the new fund.
The Managers of Tomorrow
SINO-IC Capital, the exclusive manager for the Big Fund’s initial two funds, has weathered some controversy, with several of its officials coming under investigation by China’s anti-graft authority since 2021. Nonetheless, it is anticipated to continue its role as a manager for the third fund. Additionally, Chinese officials have initiated discussions with China Aerospace Investment, the investment arm of China Aerospace Science and Technology Corporation, regarding the prospect of assuming one of the managerial roles for this momentous fund.
In conclusion, China’s proactive stance in bolstering its semiconductor industry through the establishment of this substantial investment fund underscores the nation’s determination to secure a prominent position in the global technology landscape. While challenges lie ahead, the commitment to self-sufficiency and technological advancement remains unwavering.
