China’s chip industry receives $47.5 billion in new financing

Hong Kong
CNN
—

China redoubles its efforts to dominate advanced technologies of the future by creating its largest public investment fund in semiconductors, according to information released by a government agency.

Worth $47.5 billion, the fund is being created as the United States imposes drastic restrictions on the export of American chips and technology. with the aim of curbing Beijing’s ambitions.

With investments from six of the country’s largest state-owned banks, including ICBC and China Construction Bank, the fund underlines Chinese leader Xi Jinping’s drive to strengthen China’s position as a technology superpower.

With its Made in China 2025 roadmap, Beijing has set a goal for China to become a global leader in a wide range of sectors, including artificial intelligence (AI), 5G wireless and quantum computing.

The latest investment vehicle is the third phase of the China Integrated Circuit Industry Investment Fund. The “Big Fund,” as it is called, was officially established in Beijing on Friday, according to the National Enterprise Credit Information and Publicity System.

Shares of major Chinese chipmakers jumped after the news. Semiconductor Manufacturing International Corporation (SMIC), the world’s third-largest contract chip maker, is up 7% since Monday. Hua Hong Semiconductor, China’s second-largest chip foundry and a supplier to Huawei, gained 13%.

The first phase of the fund was established in 2014 with 138.7 billion yuan ($19.2 billion). THE the second phase was established five years later, with a registered capital of 204.1 billion yuan ($28.2 billion).

Investments aims to bring the domestic semiconductor industry to international standards by 2030 and will inject funds mainly into chip manufacturing, design, equipment and materials, the Ministry of Industry and Technology said information during the launch of the first phase in 2014.

The “Great Fund” hit by corruption scandals in recent years. In 2022, the country’s anti-corruption watchdog launched a crackdown on the semiconductor industry, investigating some of China’s top executives at state-owned chip companies. Lu Jun, former managing director of Sino IC Capital, which managed the “Big Fund”, was questioned and charged with corruption in March, according to a statement from the country’s top prosecutor.

These scandals are not the only obstacles that could seriously undermine Xi’s ambitions to lead China to achieve technological autonomy.

In October 2022, the United States unveiled a broad set of export controls that prohibit Chinese companies from purchasing advanced chips and chipmaking equipment without a license. The Biden administration has also pressed its allies, including the Netherlands and Japan, to enact their own restrictions.

Beijing retaliated last year by imposing export controls on two strategic raw materials critical to the global chipmaking industry.

The new chip fund is not only a defensive measure to counter Western sanctions, but is also part of Xi’s long-standing ambitions to make China a global leader in technology.

Last year, China’s Huawei shocked industry experts by introducing a new smartphone powered by a 7-nanometer processor manufactured by SMIC.

At the time of Huawei’s phone launch, analysts couldn’t understand how the company could have the technology to make such a chip, following massive efforts by the United States to restrict China’s access to foreign technology. .

In a meeting with Dutch Prime Minister Mark Rutte in March, Xi said that “no force can stop China’s scientific and technological development.”

The Netherlands is home to ASML, the world’s only manufacturer of extreme ultraviolet lithography machines needed to manufacture advanced semiconductors. The company said in January that the Dutch government had banned it from shipping some of its lithography machines to China.