China’s 40 billion dollar fund for strengthening investments in China will soon be unveiled which is in line with Mr Xi Xinping’s vision to make China self-sufficient in the semiconductor sector.
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China’s 40 Billion Dollar Fund
According to two people with an understanding of the situation, China is getting ready to introduce a new state-backed investment fund with the goal of raising approximately $40 billion for its semiconductor industry as the nation steps up attempts to catch up with the United States and other rivals.
Moreover, China’s 40 Billion Dollar Fund is probably the largest of the three funds that the China Integrated Circuit Industry Investment Fund, often known as the Big Fund, has launched.
A comparable fund was launched in 2014 and in 2019; according to government estimates, both campaigns raised 138.7 billion yuan and 200 billion yuan, respectively. Its objective of 300 billion yuan ($41 billion) surpasses those earlier initiatives.
According to them, facilities for making chips will be one of the key spending areas.
The need for China to become self-sufficient in semiconductors has long been underlined by the Chinese President. Because Washington has been enforcing a variety of restrictions on exports in recent years amid worries that Beijing would employ cutting-edge technology to strengthen its military might, this requirement has become even more essential.
What is a Semiconductor
A substance called a semiconductor is one that has unique electrical properties that make it suitable for use as the structure of electronic equipment like computers.
In general, it is a chemical substance or element that is solid and that, in some circumstances, conducts electricity but not in others. For controlling electrical current and common electrical equipment, it is the appropriate medium.
Recent US Export Control Measures Against China
Through the Export Administration Regulations (EAR), the recent US export control measures against China were based on particular semiconductor and supercomputer-related technologies targeted at China including:
- The expansion of Entity List China-related designations
- Additional scrutiny should be paid to China’s end-user and end-use controls for military and military intelligence under EAR Parts 744.21 and 744.22.
Thus, China is facing difficulties accessing advanced chip-making equipment, and similar steps have also been taken by Japan and the Netherlands.
One of the sources said that the Chinese finance ministry wants to give 60 billion yuan. On the other hand, the contribution of the other sources is not known in detail.
Although it is unknown when the third fund will be established or whether there will be any additional changes to the plan, the first two sources suggest the fundraising process will likely take a few months.
The first two funds of the Big Fund received backing from the finance ministry as well as affluent government-owned companies like China Development Bank Capital, China National Tobacco Corporation, and China Telecom.
The two largest semiconductor foundries in China, Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, as well as flash memory manufacturer Yangtze Memory Technologies, a number of smaller businesses, and funds, have all received funding from the Big Fund throughout the years.
The Chinese chip industry has struggled to maintain a leading position in the global supply chain, especially for cutting-edge semiconductors, despite these expenses.
The Big Fund, according to the three people, is considering hiring at least two institutions to handle the initial investment of the new fund.
Besides, China’s anti-graft department has been looking into a number of senior officials and former officials at SINO-IC Capital, the sole manager of the Big Fund’s first two funds, since 2021.
The third fund’s management, SINO-IC Investment, is expected to remain in that role, according to two of the people.
Conclusion
Thus, the creation of a new state-back investment fund will be critical for China to strengthen its position in the fastest-growing semiconductor sector.
Moreover, the fund will assist China in developing state-of-the-art and advanced Chips within the country which will help China to surpass the US export controls and become a major player in this billion-dollar industry.
