China has closed a third state-backed investment fund to boost its semiconductor industry and reduce dependence on other nations, both for using and making wafers — prioritizing what it calls chip dominance.
China’s National Integrated Circuit Industry Investment Fund, also known simply as “the Big Fund”, has had two previous vintages: Big Fund I (2014 to 2019) and Big Fund II (2019 to 2024). The latter was significantly larger than the former, but Big Fund III is larger than both at 344 billion yuan, or about $47.5 billion, public filings revealed.
Exceed expectationsand after the recent Huawei increased dependence for Chinese suppliers, the size of Big Fund III confirms the country’s goal of achieving self-sufficiency in semiconductor production. It is also a reminder that the chip war between China and the West it goes both ways.
The US and Europe are not alone in wanting to reduce their dependence on their eternal technological rival. China, too, has reason to worry about its supply, and it’s not just exports from the US and its partners. in danger.
When it comes to chip manufacturing, Taiwan is the main concern. For China to gain control of its manufacturing capabilities would put the US and its allies at a huge disadvantage. Taiwan Semiconductor Manufacturing Co. (TSMC) today produces about 90% of the world’s most advanced chips.
On the other hand, Bloomberg has heard from sources that ASML and Netherlands-based TSMC have ways to disable the chip making machines in case China invades Taiwan.
As for China, it produces some 60% of legacy chips — the type found in cars and appliances, U.S. Commerce Secretary Gina Raimondo said recently.
The chip war extends to both legacy and advanced brands, with mixed results.
The Chinese official narrative is that US policy is boomerangwith exports from top US chip players declining and others share this view.
Either way, that leaves a company like Nvidia walking a fine line “between maintaining the Chinese market and navigating tensions in the U.S.,” Hebe Chen, a market analyst at IG, said recently. Reuters. The company customized three chips for China after US sanctions prevented it from exporting its most advanced semiconductors, but competition forced it to adopt a lower price than it would have liked.
However, it could also be argued that trade racing by Western chip players may be worth the cost if it can prevent China from developing and gaining access to more advanced chips as quickly as its competitors.
Signs are that the restrictions could hit China where it hurts. For example, if the country’s AI companies lose access to Nvidia’s cutting-edge chips, or if it makes it difficult for its champion, SMIC, to produce its own.
Big Fund III itself shows that China is feeling the heat. According References, the funds will be used for large-scale wafer manufacturing like previous funds, but also for high-bandwidth memory chip manufacturing. Known as HBM chips, these are used in AI, 5G, IoT and more.
Its size, however, is the biggest factor.
Supported by six major state-owned banksBig Fund III is now larger than the $39 billion in direct stimulus that the US government will devote to chip manufacturing as part of Chip Law. However, the entire pool of federal funding adds up 280 billion dollars.
At €43 billion, the EU’s chip law looks small compared to the two, as does South Korea’s $19 billion bailoutand markets likely took notice.
The news of Big Fund III caused a rally around shares from Chinese semiconductor companies set to benefit from this new capital. However, Bloomberg noted that Beijing’s past investments they didn’t always pay.
Specifically, “China’s top leadership was disappointed with a chronic failure to develop semiconductors that could replace US circuits. In addition, the former boss of the Grand Fund was also removed investigated for corruption,” the media outlet pointed out.
Even without corruption, making big changes in semiconductor manufacturing is a slow process. In Europe and the US, too, this takes time, but there are interesting new developments.
French deep-tech startup Diamfab, for example, is working on diamond semiconductors that could support the green transition, particularly in the automotive industry. It’s still a few years away, but it’s the kind of Western innovation that could be just as interesting to watch as whatever the old Chinese players are up to.
Additional reporting by Rita Liao.
