China unveils US$47.5b fund to boost semiconductor sector
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The news: China has set up another semiconductor investment fund as Beijing pushes to attain self-sufficiency in its domestic chip industry.
The numbers: At USD47.5 billion ($71.39 billion), the latest fund is the biggest in the country to date, with the largest shareholder being China’s Ministry of Finance which holds a 17% stake. The first phase of the fund was set up in 2014 with USD19.2 billion, while the second phase was established in 2019, with a registered capital USD28.2 billion.
The context: The third fund, titled ‘Big Fund III,’ shows new efforts by Beijing to counter recent moves from the US to challenge China’s strength in chip manufacturing.
Big Fund III marks the third phase of the National Integrated Circuit Industry Investment Fund, and has collected the USD47.5 billion from across central government and state-owned banks and enterprises including ICBC and China Construction Bank.
The US, particularly the Biden administration, has taken strong steps to curb China’s ability to compete in the semiconductor space, by banning the sale of sophisticated AI chips from the likes of Nvidia to China. The US also recently increased its tariff rate on Chinese semiconductors from 25% to 50% by 2025, and is urging other western nations to follow suit.
The US has rolled out sizeable grants to chipmakers in efforts to attract more manufacturing projects and steer companies away from China, with the Biden administration setting aside USD39 billion in tax benefits, loan guarantees and grants under the CHIPS Act.
