China to Launch $40 bn Investment Fund to Boost Semiconductor Sector

In a move to bolster its semiconductor industry and reduce dependency on foreign technology, China is gearing up to launch a state-backed investment fund that aims to raise approximately $40 billion, Reuters news report said.
BE SemiconductorThis initiative is part of the country’s broader strategy to compete with the United States and other global rivals in the critical semiconductor sector.

The China Integrated Circuit Industry Investment Fund, widely known as the “Big Fund,” is spearheading this ambitious endeavor. The $41 billion target for the new fund surpasses the amounts raised by its predecessors in 2014 and 2019, which garnered 138.7 billion yuan and 200 billion yuan, respectively, according to government reports.

A significant portion of the investment is expected to be directed towards acquiring equipment for chip manufacturing, a crucial component for semiconductor production.

Chinese President Xi Jinping has consistently emphasized the need for China to attain self-sufficiency in semiconductor technology. This imperative has gained even more urgency in recent years as the United States imposed a series of export control measures. These measures were enacted due to concerns that Beijing could leverage advanced chips to enhance its military capabilities. Notably, in October, the U.S. rolled out extensive sanctions that severed China’s access to advanced chipmaking equipment. Likewise, U.S. allies Japan and the Netherlands have also imposed similar restrictions.

The approval for the establishment of this new fund was granted by Chinese authorities in recent months, underlining the nation’s commitment to advancing its semiconductor capabilities. The Chinese finance ministry has pledged to contribute 60 billion yuan to support this initiative.

Historically, backers of the Big Fund’s previous two investment funds have included the finance ministry and well-endowed state-owned entities such as China Development Bank Capital, China National Tobacco Corporation, and China Telecom. Over the years, the Big Fund has provided financing to key players in China’s semiconductor industry, including Semiconductor Manufacturing International Corporation, Hua Hong Semiconductor, Yangtze Memory Technologies, and several smaller companies and funds.

Despite these investments, China’s semiconductor industry has faced challenges in establishing a prominent role within the global supply chain, particularly in the domain of advanced chips. However, with the launch of this substantial investment fund, China is signaling its determination to bridge the technological gap and achieve greater self-reliance in this critical sector. Observers will be closely monitoring the progress and impact of this ambitious endeavor on the global semiconductor landscape.

The US-based Semiconductor Industry Association (SIA) in August announced worldwide sales of semiconductors totaled $124.5 billion during the second quarter of 2023, an increase of 4.7 percent over the first quarter of 2023 but 17.3 percent less than the second quarter of 2022.

Global sales of semiconductors for the month of June 2023 were $41.5 billion, an increase of 1.7 percent compared to the previous month.

Regionally, month-to-month sales of semiconductor increased in the Americas (4.2 percent), China (3.2 percent), Japan (0.9 percent), and Europe (0.1 percent), but fell slightly in Asia Pacific/All Other (-0.5 percent). Year-to-year sales were up in Europe (7.6 percent), but down in Japan (-3.5 percent), the Americas (-17.9 percent), Asia Pacific/All Other (-20.4 percent), and China (-24.4 percent), according to SIA.