China has launched a state-backed investment fund valued at 344 billion yuan (approximately US $47.5 billion), aiming to bolster its semiconductor industry.
This push for domestic chip production gained significant momentum following a series of export controls imposed by the United States over the past two years. The U.S. expressed concerns that China could leverage advanced chips to bolster its military capabilities. The Chinese stock market responded positively to the news. The CES CN Semiconductor Index surged over 3% on Monday, nearly achieving its most significant single-day gain in over a month.
Hong Kong-listed shares of SMIC and Hua Hong Semiconductor also surged in response to this development, signaling investor confidence in China’s strategic move.
Officially launched on May 24, this third iteration, known as the third phase of the China Integrated Circuit Industry Investment Fund, is the largest of the three funds established under the government’s “Big Fund” initiative designed to support the domestic semiconductor sector.
Big Fund III boasts 19 equity investors, led by China’s Ministry of Finance with a 17% stake. Other key participants include the state-owned China Development Bank Capital (10% stake) and state-asset manager Shanghai Guosheng Group (8% stake). Additionally, China Construction Bank, Bank of China, Agricultural Bank of China, Bank of Communications, and Postal Savings Bank of China have all pledged significant contributions to the fund.
The size of this new fund is roughly on par with the US billion in incentives provided under the Chips and Science Act, enacted by US President Joe Biden in 2022.
The Big Fund’s previous phases were launched in 2014 (registered capital of 138.7 billion yuan) and 2019 (204 billion yuan). It has provided financial backing to China’s leading chip manufacturers, including Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, along with flash memory maker Yangtze Memory Technologies and various smaller companies.
