Amid escalating tensions and a global race for semiconductor supremacy, China has announced the creation of its largest-ever $47.5 Billion fund aimed at boosting its domestic chip manufacturing capabilities.
Despite years of semiconductor-based sanctions imposed by the US, China remains undeterred, showcasing resilience and innovation in its tech sector. This bold move signifies China’s commitment to achieving self-reliance in chip manufacturing and reducing dependence on foreign suppliers.
The Birth of Big Fund III
The third phase of the National Integrated Circuit Industry Investment Fund, known as Big Fund III, was officially launched on May 24. This fund has secured a substantial 344 billion yuan (approximately $47.5 billion) from the central government, state-owned banks, and enterprises, including the Industrial & Commercial Bank of China Ltd. Leading this initiative is China’s Ministry of Finance, with significant contributions from local government investment firms in Shenzhen and substantial backing from Beijing.
The primary goal of Big Fund III is to accelerate the development of China’s semiconductor industry. By investing $47 billion fund in domestic chip manufacturing, China aims to create a robust supply chain that can withstand external pressures and sanctions. The Shenzhen government, in particular, has been instrumental in investing in chipmaking facilities in Guangdong province, supporting major companies like Huawei and Semiconductor Manufacturing International Corporation (SMIC).
Impact on the Market
The announcement of the semiconductor related billion fund has already had a positive impact on China’s chip stocks. Major players such as SMIC and Hua Hong Semiconductor have experienced significant gains in the market, reflecting investor confidence in China’s strategic direction.
This surge in stock prices highlights the optimism surrounding China’s potential to enhance its semiconductor capabilities despite external challenges.
Global Semiconductor Race
China’s ambitious move comes amidst a global race for chip supremacy. Major powers like the US and the European Union are also investing billions into semiconductor development to secure their technological futures. The establishment of $47.5 Billion Fund underscores China’s determination to remain a significant player in this competitive arena.
The US, meanwhile, continues to urge its allies to tighten export controls on China. However, these efforts have not been entirely successful. For instance, NVIDIA recently decided to slash the prices of its China-specific AI GPUs, a move largely attributed to competition from Huawei’s latest chip offerings. Additionally, ASML, the world’s largest maker of lithography and chipmaking equipment, is seeking ways to maintain its business with Chinese tech companies, despite adhering to sanctions imposed by the Netherlands in alignment with US restrictions.
Establishment of $47.5 Billion Fund
While China presses forward with its semiconductor ambitions, US companies are facing increased scrutiny for their dealings with Chinese firms. Applied Materials, a leading semiconductor equipment maker, has disclosed receiving subpoenas from the US Department of Commerce and other agencies regarding its shipments to China. The company is under investigation for potentially violating export restrictions by supplying equipment to SMIC, China’s top chipmaker. This investigation highlights the growing tensions between the US and China in the semiconductor sector.
China’s establishment of the $47.5 billion fund for Semiconductors demonstrates its unwavering commitment to achieving technological self-sufficiency. Despite ongoing sanctions and external pressures, China’s strategic investments in chip manufacturing are poised to reshape the landscape of the global semiconductor industry.
As the competition intensifies, China’s resilience and innovative prowess could significantly influence the future of this critical sector. The success of this $47 billion fund will be closely watched by both supporters and skeptics, as it represents a pivotal moment in China’s quest for semiconductor dominance.
