China is gearing up to establish yet another investment fund to finance the development of its domestic semiconductor industry, according to Reuters. The new fund will have $40 billion to invest in companies developing and producing wafer fab equipment. It will be one of the most substantial efforts by the China Integrated Circuit Industry Investment Fund, also known as the Big Fund.
The report claims that the new fund could be China's most important because it focuses on the country's fundamental abilities to build tools for making chips. In recent years, Chinese chipmakers have lost access to more or less sophisticated wafer fab equipment from American, Dutch, and Japanese companies, which significantly limits the development of China's semiconductor champions, such as SMIC and YMTC.
While China's SMIC and YMTC have competitive logic and 3D NAND manufacturing technologies, they need tools produced in the U.S., Netherlands, and Japan to use them. Without access to equipment from ASML, Applied Materials, and Tokyo Electron, these companies will not be able to develop further, so China is ready to help local makers of fab tools.
Previously, in 2014 and 2019, China had launched similar investment funds but on a smaller scale, garnering funds amounting to 138.7 billion yuan and 200 billion yuan, respectively. The upcoming fund dwarfs these amounts, targeting an ambitious 300 billion yuan ($41 billion), emphasizing its utmost importance.
On the funding front, China's finance ministry has committed to infusing a substantial portion of the fund, with a contribution of 60 billion yuan, according to Reuters. However, details about other potential contributors remain under wraps. Entities such as China Development Bank Capital, China National Tobacco Corporation, and China Telecom have historically backed the Big Fund's initiatives.
Regarding management and oversight for the new fund, the Big Fund contemplates engaging at least two institutional entities. Despite being under investigation since 2021, SINO-IC Capital is projected to remain a pivotal player in managing the fund. Additionally, discussions with China Aerospace Investment, a state-owned enterprise's investment arm, have been initiated for potential managerial roles.
The geopolitical landscape significantly influences China's intensified efforts in the semiconductor domain. President Xi Jinping has continually emphasized the critical importance of the nation becoming self-reliant in the semiconductor sector. This urgency has been magnified with the U.S., alongside allies like Japan and the Netherlands, imposing stringent restrictions on China's access to advanced chipmaking resources, citing security and defense concerns.
Despite hefty investments from the Big Fund in the past, China's position in the global semiconductor arena, especially regarding advanced logic chips, remains elusive.