China Launches Third $47.5B Semiconductor Fund

The third planned state-backed investment fund to strengthen China’s semiconductor industry has a registered capital of 344 billion yuan ($47.5 billion), according to a government-run enterprises registry filing

The hundreds of billions of yuan invested in the sector provide context for President Xi Jinping’s goal of achieving semiconductor self-sufficiency for China.

Since the United States imposed export control measures over the past few years, citing concerns that Beijing may use advanced processors to enhance its military capabilities, this commitment has created a renewed sense of urgency.

The CES CN Semiconductor Index (CSI990001) increased by over 3% and is poised to record its most significant one-day gain in over a month as Chinese chip stocks rose.

The Beijing Municipal Administration for Market Regulation registered the third phase of the China Integrated Circuit Industry Investment Fund on May 24, according to the National Enterprise Credit Information Publicity System, a government-run credit information agency.

Among the three funds initiated by the China Integrated Circuit Industry Investment Fund, commonly called the “Big Fund,” the third phase will be the most substantial.

The largest shareholder is the Chinese Ministry of Finance, with a paid-in capital of 60 billion yuan and a 17% stake, according to Tianyancha, a Chinese company information database. With a 10.5% stake, China Development Bank Capital is the second-largest shareholder.

After some time, the Ministry of Finance responded to Reuters’ request for comment.

Five central Chinese banks—Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, and Bank of Communications—are among the seventeen additional entities cited as investors. Each of these banks contributes approximately 6% of the total capital.

In September, Reuters reported that China intended to initiate the third phase of the Big Fund.

The initial stage of the fund was established in 2014 with 138.7 billion yuan in registered capital; the subsequent stage was initiated in 2019 with 204 billion yuan.

The two largest chip foundries in China, Semiconductor Manufacturing International (0981. HK) and Hua Hong Semiconductor (688347. SS) opened a new tab, in addition to several smaller companies and funds, which have received financial support from The Big Fund.

The third phase of the fund will prioritize equipment for semiconductor manufacturing, according to a September report by Reuters. The Big Fund is also contemplating the employment of a minimum of two institutions to invest the capital generated in the third phase.