To increase self-sufficiency in the semiconductor sector, China has launched the third phase of its National Integrated Circuit Industry Investment Fund, commonly known as Big Fund III. Established last week, this new fund boasts a registered capital of 344 billion yuan (approximately $47.5 billion), making it the largest state-backed investment in China’s semiconductor industry to date.
Big Fund III is designed to support various segments of the semiconductor industry, including contract manufacturers, equipment suppliers, and material providers. The primary objective is to bolster domestic capabilities and reduce reliance on foreign technology, particularly in the face of escalating US tech sanctions.
Leading beneficiaries of this substantial investment include Semiconductor Manufacturing International Corp (SMIC) and Hua Hong Semiconductor. Additionally, equipment suppliers such as Naura Technology Group and Advanced Micro-Fabrication Equipment, along with raw material providers like National Silicon Industry Group, are set to gain significant support.
Big Fund III is seen as a countermeasure to the US Chips and Science Act of 2022, which allocated $53 billion to boost the American semiconductor industry. China’s strategic goal with this fund is to build a robust, self-sufficient semiconductor industry capable of withstanding external pressures and restrictions. The fund comprises 19 equity investors, led by China’s Ministry of Finance
Historical Background and Challenges
This latest fund follows two previous phases: the first, launched in 2014 with an initial financing of 138.7 billion yuan, and the second in 2019, which raised 204.1 billion yuan. Despite past successes, such as fostering companies like Yangtze Memory Technologies Corp and ChangXin Memory Technologies, the industry has faced significant challenges. Notably, US export controls have hindered access to advanced chip-making equipment, impacting production yields and cost efficiency.
The fund’s previous management faced corruption issues, with former president Ding Wenwu under investigation since July 2022. Zhang Xin, the current president, has taken over with a focus on transparency and effective investment.
The fund’s focus is on capacity expansion, equipment, materials, and advanced packaging. However, narrowing the technology gap with global leaders remains a challenge due to ongoing export restrictions.
Related:
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