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China Boosts Big Fund with US$47.5 Billion in Third Phase

May 27, 2024

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The semiconductor industry in China is set to receive a significant boost with the announcement of a new phase of the China Integrated Circuit Industry Investment Fund, also known as the Big Fund. This move demonstrates China's commitment to achieving self-sufficiency and a world-class position in semiconductor manufacturing, especially in the face of export restrictions imposed by the US. The fund for this new phase is nearly double the size of the previous phase, highlighting the growing importance of the semiconductor sector in China's economic strategy.

One of the key focuses of the third phase of the Big Fund will be to support not only fabless chip companies but also foundry chip manufacturers. This strategic decision aims to reduce China's dependence on foreign suppliers, particularly in the area of chipmaking equipment where export controls have previously hindered progress. By investing in domestic chip manufacturing capabilities, China hopes to strengthen its position in the global semiconductor market.

The China Integrated Circuit Industry Investment Fund has attracted a diverse group of investors, with the country's finance ministry holding the largest stake at 17 percent. Other investors include state-owned banks, enterprises, and local government authorities from regions such as Shenzhen and Beijing. The incorporation of the fund in May 24 signifies a new chapter in China's efforts to boost its semiconductor industry.

Established in 2014 with an initial fund of 100 billion yuan, the Big Fund was created to support the growth of China's semiconductor sector through investments in chip startups and research and development. While the fund initially faced criticism for its broad approach, subsequent phases have been more targeted in their focus. The second phase, launched in 2019 with over 200 billion yuan in capital, aimed to support startups and scale-ups while also enhancing chip manufacturing capabilities.

Despite facing challenges such as corruption investigations involving top executives, the Big Fund has played a crucial role in driving innovation and growth in China's semiconductor industry. Companies like Huawei have benefited from the fund's investments, with initiatives such as the establishment of a research and development base for home-grown lithography. As China continues to invest billions in memory firms and local foundries, the semiconductor landscape in the country is poised for further expansion and development.

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