In this image from February 17, 2023, a Chinese flag is seen next to a “Made in China” sign on a circuit board containing semiconductor chips. Portal/Florence Lo/Illustration/File Photo Acquire License Rights
HONG KONG/BEIJING, Sept 5 (Portal) – China will launch a new state-backed investment fund to raise about $40 billion for its semiconductor sector, two people familiar with the matter said, as the country steps up efforts with the United States and catch up with other rivals.
It is probably the largest of three funds launched by the China Integrated Circuit Industry Investment Fund, also known as the Big Fund.
Its target of 300 billion yuan ($41 billion) exceeds similar funds in 2014 and 2019, which raised 138.7 billion yuan and 200 billion yuan, respectively, according to government reports.
A key area of investment will be chip-making equipment, one of the two people and a third person familiar with the matter said.
President Xi Jinping has long stressed the need for China to achieve self-sufficiency in semiconductors. That need has become all the more urgent after Washington introduced a series of export control measures in recent years and expressed fears that Beijing could use advanced chips to boost its military capabilities.
In October, the U.S. introduced a sweeping sanctions package that limited China’s access to advanced chipmaking equipment, and U.S. allies Japan and the Netherlands have taken similar steps.
The new fund was approved by Chinese authorities in recent months, two of the people said.
China’s Finance Ministry plans to contribute 60 billion yuan, one person said. Other contributors could not immediately be identified.
All sources declined to be named because the discussions were confidential.
The State Council Information Office, which handles media queries on behalf of the government, finance ministry and industry and information technology ministry, did not immediately respond to Portal requests for comment.
The Big Fund also did not immediately respond to requests for comment.
PREVIOUS INVESTMENTS
The fundraising process will likely take months and it is not immediately clear when the third fund will be launched or whether further changes will be made to the plan, the first two sources said.
Backers of the Big Fund’s two previous funds include the Ministry of Finance and deep-pocketed state-owned enterprises such as China Development Bank Capital, China National Tobacco Corporation and China Telecom.
Over the years, the Big Fund has funded China’s two largest chip foundries, Semiconductor Manufacturing International Corporation (0981.HK) and Hua Hong Semiconductor (688347.SS), as well as Yangtze Memory Technologies, a maker of flash memory, and others a number of smaller companies and funds.
Despite these investments, China’s chip industry has struggled to take a leading role in the global supply chain, particularly in advanced chips.
INVESTMENT MANAGER
The Big Fund is considering engaging at least two institutions to invest the new fund’s capital, the three people said.
Several senior and former officials of SINO-IC Capital, the sole manager of the Big Fund’s first two funds, have been under investigation by China’s anti-corruption agency since 2021.
Still, SINO-IC Capital is expected to remain one of the third fund’s managers, two of the people said.
SINO-IC Capital did not immediately respond to a request for comment.
Chinese officials have also approached China Aerospace Investment, the investment arm of state-owned China Aerospace Science and Technology Corporation, to discuss becoming one of the managers, two of the people said.
China Aerospace Investment did not immediately respond to a request for comment.
($1 = 7.2901 Chinese Yuan)
Reporting by Julie Zhu, Kevin Huang, Yelin Mo and Roxanne Liu; Editing by Sumeet Chatterjee and Edwina Gibbs
Our standards: The Trust Principles.
Acquire license rights, opens new tab