In a dramatic shift that signals escalating tensions in the global semiconductor war, China has restructured its $50 billion chip fund—known as Big Fund III—to directly target the technological choke points imposed by the United States.
Red Silicon Uprising: China’s $50 Billion Chip Fund Shifts Strategy to Fight U.S. Tech Curbs
This move marks a significant evolution in Beijing’s response to the years-long effort by Washington and its allies to limit China’s access to advanced chipmaking tools, software, and intellectual property.
China’s semiconductor ambitions were once spread across a wide array of startups and manufacturing projects. Big Fund III now takes a focused approach, investing in key bottlenecks like lithography systems and chip design software. These sectors are nearly all controlled by Western countries. With this strategy, Beijing aims to reduce its tech dependence. It wants to fix core weaknesses in its semiconductor industry. The goal is to break past long-standing barriers and achieve high-tech self-reliance.
What Is Big Fund III?
The National Integrated Circuit Industry Investment Fund, known as the Big Fund, is China’s largest state-backed semiconductor investment vehicle. It launched in 2014 and has rolled out in three phases. The fund has invested tens of billions of dollars to support the domestic chip industry. One of its major recipients is SMIC, which is China’s leading chip foundry.
However, despite those huge investments, China has yet to achieve self-sufficiency in critical chipmaking tools. Dutch company ASML dominates advanced EUV lithography, a key technology for making cutting-edge processors. It holds a near-monopoly in this field, as no other firm matches its capabilities. On the software side, American companies Cadence Design Systems and Synopsys Inc. lead the electronic design automation (EDA) market. EDA tools are essential for designing and simulating chip architecture, making them critical to modern semiconductor production.
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Big Fund III is now refocusing its capital on these strategic weaknesses—an unmistakable response to the U.S.-led technology blockade.
What Prompted This Strategic Overhaul?
The trigger is clear: years of increasing U.S. sanctions aimed at slowing China’s access to the technologies that power artificial intelligence, cloud computing, and military-grade hardware. These include restrictions on exporting chips, software, and equipment used in making high-performance processors.
The Biden administration, continuing policies from the Trump era, tightened curbs in October 2022 and again in 2023. The goal? To halt China’s access to 5nm and below chip processes and to deny it the tools to build its own advanced AI infrastructure.
These actions effectively blocked Chinese firms from buying from key U.S. and allied suppliers. That included restrictions on NVIDIA’s AI chips, ASML’s lithography equipment, and EDA tools. The message was unmistakable: keep China from building the next generation of intelligent machines.
What’s Changing in Big Fund III?
Unlike earlier phases of the fund, which spread capital thinly across dozens of firms, Big Fund III will concentrate investments in fewer but more critical areas. Insiders say the new strategy is designed to support:
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Lithography development: The single most difficult part of chip fabrication. China is trying to develop its own alternatives to ASML’s dominant EUV systems.
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Chip design tools: With U.S. firms pulling out of China, local alternatives like X-Epic and Empyrean are being nurtured to fill the gap.
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Longer investment timelines: The fund is planning to hold positions over 10 to 15 years instead of looking for short-term returns.
While Big Fund III originally aimed to raise ¥344 billion ($48 billion), funding has fallen short for now. But Chinese officials view the shortfall as temporary. The broader message remains powerful: China is digging in for the long war in tech.
Why This Matters for Global Tech and AI
China is not just playing defense. The fund’s reboot is directly tied to AI ambitions. Firms like Alibaba, Baidu, and fast-rising startup DeepSeek are building large language models and competing with U.S. giants like OpenAI, Anthropic, and Google DeepMind. These Chinese firms need domestic chip infrastructure to stay competitive as U.S. restrictions tighten.
According to Chinese President Xi Jinping, eliminating choke points is now a national security imperative. The stakes are high: whoever controls chip production controls the future of AI, military systems, and digital economies.
The Bottom Line
China’s Big Fund III marks a strategic escalation in the global semiconductor rivalry. This isn’t just a funding shift—it’s a signal to the world that China is prepared to counter U.S. tech sanctions with targeted, long-term investments.
It also raises the possibility of a tech cold war, where parallel ecosystems develop—one led by the U.S. and its allies, the other by China and its partners.
For now, the world watches closely as the world’s second-largest economy sharpens its semiconductor sword—moving from broad ambition to focused retaliation.
If successful, Big Fund III could usher in a new era of Chinese-made chips—and potentially redraw the power map of global technology.