China Launches $47.5 Billion Semiconductor Investment Fund

China has taken a significant step towards strengthening its semiconductor industry by launching its third state-backed investment fund, the China Integrated Circuit Industry Investment Fund, with a substantial registered capital of 344 billion yuan ($47.5 billion). This move aligns with President Xi Jinping's vision of achieving self-sufficiency in semiconductor production, especially amidst concerns raised by the US regarding potential military applications.

The 'Big Fund,' as it is commonly known, entered its third phase on May 24, 2024, marking the largest phase among the three funds. The Ministry of Finance of China leads the investment with a 17% stake, injecting 60 billion yuan in paid-in capital, followed by China Development Bank Capital with a 10.5% stake.

Seventeen other entities, including major Chinese banks like Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, and Bank of Communications, have also invested in the fund, each contributing around 6% of the total capital.

Since its inception in 2014, the Big Fund has played a crucial role in providing financial support to key players in China's semiconductor industry, such as Semiconductor Manufacturing International Corporation, Hua Hong Semiconductor, and Yangtze Memory Technologies, as well as smaller companies and funds within the sector.

The third phase of the fund is set to focus on investments in chip manufacturing equipment, emphasizing the strategic goal of enhancing domestic semiconductor production capabilities. Plans are underway to appoint at least two institutions to manage the capital allocated for this phase.

The establishment of the China Integrated Circuit Industry Investment Fund's third phase underscores China's commitment to advancing its semiconductor industry and reducing reliance on foreign technology. This initiative not only aims to boost domestic production but also signals a strategic shift towards self-sufficiency in a critical sector. With significant investments and strategic priorities in place, China is poised to strengthen its position in the global semiconductor market.