China to give chipmakers $27 billion to counter U.S. sanctions — Big Fund III will have further funding rounds

Micron
(Image credit: Micron)

China is assembling the third phase of its Big Fund to invest in crucial semiconductor projects across the country, a move that aims to accelerate the development of advanced technologies, make China self-reliant in the microelectronics industry, and counteract the United States' efforts to limit China's technological advancement.

The third phase of the National Integrated Circuit Industry Investment Fund, or the Big Fund, will pursue the same goal as the first two phases: make China self-sufficient in the semiconductor sector. According to a Bloomberg report, the Big Fund's third-phase vehicle will primarily draw its capital from local governments, state-owned enterprises, and their investment branches, with the central government contributing a smaller portion. This strategy aligns with President Xi Jinping's vision of pooling resources nationwide for significant projects, emphasizing self-reliance in the semiconductor sector.

The first round of Big Fund III funding is designed to raise $27 billion, a relatively modest sum by the Chinese standards for its semiconductor industry. Cities like Shanghai and entities like the China Chengtong Holdings Group and the State Development and Investment Corp. are expected to invest billions of yuan each in the third-phase fund. Meanwhile, the report says the fund will directly support local companies and finance three to four sub-funds to diversify deal sourcing and investment strategies.

The fund's expansion comes as the United States urges its allies to tighten restrictions on China's access to tools required to make chips on advanced product nodes, part of an ongoing chip war for control of the semiconductor manufacturing industry. Back in September, Big Fund II initiated a round to raise $41 billion to support domestic makers of wafer fab equipment. However, for Big Fund III, $27 billion will be spent on essential projects across China.

Since its inception in 2014, the Big Fund (2014 – 2018, ~$100B) and the Big Fund II (2019 - 2023 , ~$41B) have raised hundreds of billions of dollars and acquired stakes in dozens of microelectronics companies. Meanwhile, Bloomberg claims that Big Fund's assets under management are currently valued at around $45 billion, which could be a direct result of the U.S. sanctions against China's semiconductor sector, which significantly hit companies like SMIC (China's foundry champion) and Yangtze Memory Technologies Co. (YMTC, China's top 3D NAND maker).

Despite its successes, the Big Fund has faced criticism for its lack of transparency and accountability, operating primarily behind the scenes. Nonetheless, it is indisputable that the hundreds of billions of dollars poured into China's semiconductor industry made the country one of the most prominent players in this field.

Anton Shilov
Contributing Writer

Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

  • kjfatl
    This is good news for all chip makers. This is capitalism on a large scale with "China Inc" vs about 100 tiny competitors like Intel, TSMC and TI. If the western nations do not respond these former western electronics companies will go the way of RCA, Westinghouse, Philco and others. The winners will be consumers worldwide. The western subsidies like the US chip act are simply defensive measures that balance the field in a battle or competition that has been going on for decades.
    Reply
  • Geef
    kjfatl said:
    This is good news for all chip makers.
    Yeah plus even if China's chip makers have 10 year old machines that is still enough to make most chips required for most equipment made. They won't make anything like an Nvidia AI video card of course... unless they want the world's first special ed AI. ;)
    Reply
  • subnerdy
    Geef said:
    Yeah plus even if China's chip makers have 10 year old machines that is still enough to make most chips required for most equipment made. They won't make anything like an Nvidia AI video card of course... unless they want the world's first special ed AI. ;)
    You really think they don't make anything like Nvidia chips? Lol. Ever heard of Huawei Ascend chips? The only thing they lack is an accompanying software like CUDA, which last I read they're trying to make one.
    Reply
  • peachpuff
    How much of that 27 billion is for espionage?
    Reply
  • thisisaname
    A highly political story, but you do not allow posts that are political.
    Reply
  • gg83
    subnerdy said:
    You really think they don't make anything like Nvidia chips? Lol. Ever heard of Huawei Ascend chips? The only thing they lack is an accompanying software like CUDA, which last I read they're trying to make one.
    Bad attitude. Huawei has nothing similar to nvidia. Just stop. Don't believe the propaganda.
    Reply
  • litho guy
    The western world should not be complacent. Before sanctions, China was was happy to pay the West for their equipment and stay a half step behind. Now they're forced to invest in themselves and innovate. In 10 or 20 years we may see them come out ahead.
    Reply
  • zsydeepsky
    gg83 said:
    Bad attitude. Huawei has nothing similar to nvidia. Just stop. Don't believe the propaganda.
    It's funny, Nvidia literally listed Huawei as their AI chipmaking rival, in their own financial report, weeks ago.

    https://www.marketwatch.com/story/nvidia-lists-huawei-as-an-ai-chip-making-rival-for-the-first-time-a2e5cbb3
    Reply