China’s top anti-corruption regulator has launched investigations into several executives linked to the country’s largest chip mutual fund, as Beijing steps up scrutiny of the sector in its race for technological self-sufficiency.
Chinese authorities announced this week that they are investigating three former executives linked to the National Integrated Circuit Industry Investment Fund, dubbed the “Big Fund,” which has raised $51 billion in its last two funding rounds .
China’s Central Commission for Disciplinary Inspection (CCDI) said it is investigating Du Yang, the former director of SINO IC Capital, which manages the big fund’s assets, for “alleged serious violations of discipline and laws.” The CCDI said it was also investigating two former SINO IC Capital investment managers, Yang Zhengfan and Liu Yang.
At least five chip fund managers have been investigated for fraud in the last two months. The investigations follow the collapse of state-backed conglomerate Tsinghua Unigroup, a semiconductor manufacturer that embarked on a court-ordered reorganization last year.
Beijing is under pressure to accelerate its semiconductor industry as mounting U.S. restrictions threaten its chip supply chain. The FT reported this week that Taiwanese security officials want Foxconn to drop its stake in Tsinghua Unigroup as the country seeks closer ties with the US.
“Beijing is becoming more and more curious about the performance of companies,” said Linghao Bao, an analyst at Trivium China. “Corruption is not tolerated here.”
He added, “You can bet Beijing isn’t happy that one of its key state-owned semiconductor companies just went bankrupt.”
On July 30, the CCDI announced that it was investigating Ding Wenwu, the executive director of the Big Fund, over similar allegations. Two weeks earlier, Lu Jun, the former head of SINO IC Capital, was arrested by the anti-corruption bureau.
Chinese news agency Caixin reported last month that Wang Wenzhong, a former classmate of Lu’s who ran a smaller fund in partnership with the Big Fund, and Zhao Weiguo, who ran ailing chipmaker giant Tsinghua Unigroup for a decade, have both been placed were examined. Diao Shijing, the former co-president of Tsinghua Unigroup, is also under investigation, Caixin reported last week.
The Financial Times has not independently verified the cases. Wang, Zhao and Diao could not be immediately reached for comment. The Big Fund did not immediately respond to a request for comment.
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The Big Fund, established in 2014 to advance China’s chip self-reliance, raised RMB138.7 billion for its first phase of the fund and RMB204 billion for its second phase. The fund is backed by well-funded state investors, including the Ministry of Finance, China Tobacco, China Mobile and the China Development Bank.
Over the years, the Big Fund has expanded its investment portfolio from chip manufacturing to commodities, providing financing to domestic champions such as Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor, two of the country’s largest chip makers.
But China’s ambitions for technological self-sufficiency have been hampered by Washington’s mounting sanctions and export restrictions, which have forced SMIC to abandon plans to manufacture some types of advanced chips and halt its global growth.