China to create $40 billion state fund to support semiconductor industry

Processors are the new oil, and every country wants to have its own development and production of semiconductors. Despite the fact that there are many high-tech industries in China, China’s hi-end processors are not very good, especially after the restrictions imposed by the US government. Therefore, China is introducing its own Chips Act, writes Reuters.

According to Reuters sources, the Chinese government is going to launch a new state investment fund that aims to raise about $40 billion for the semiconductor sector. It is likely to be the largest of three funds established by the China Integrated Circuit Industry Investment Fund, also known as the Big Fund.

The goal of 300 billion yuan ($41 billion) exceeds the funds raised by similar funds in 2014 and 2019. The previous funds raised 138.7 billion yuan and 200 billion yuan, respectively, according to government reports.

One of the main areas of investment will be the purchase of equipment for the production of microchips, access to which is currently limited for China.

Xi Jinping has long emphasized the need for China to be self-sufficient in semiconductors. This need has become even more acute after Washington imposed a series of export control measures due to fears that Beijing could use advanced chips to enhance its military capabilities.

The fundraising process is likely to take months, and it is not yet clear when the third fund will be launched or whether there will be any changes to these plans.

The sponsors of the two previous Big Funds include the Ministry of Finance and state-owned companies with large profits, such as China Development Bank Capital, China National Tobacco Corporation, and China Telecom.

Over the years, the Big Fund has provided funding to two of China’s largest chipmakers, Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, as well as flash memory manufacturer Yangtze Memory Technologies, and a number of smaller companies and funds.

Despite these investments, China’s chip industry is still not able to play a significant role in the global market, especially in terms of advanced chips.