China is set to launch a new state investment fund aimed at raising $41 billion to support the development of the domestic semiconductor industry, according to sources familiar with the situation as reported by Reuters.
The fund, known as the Big Fund, will become the largest Chinese investment fund of its kind. The planned fund size of 300 billion yuan ($41 billion) surpasses previous funds raised in 2014 (138.7 billion yuan) and 2019 (200 billion yuan). The primary focus of the fund will be on investing in microchip production equipment.
Chinese President Xi Jinping has long stressed the importance of achieving self-sufficiency in the semiconductor field. This has become particularly relevant after the US introduced several export control measures, citing concerns that Beijing could utilize advanced technologies to enhance its military capabilities.
Last October, the US implemented a comprehensive package of sanctions that restricted China’s access to advanced microchip production equipment. Similar measures were also taken by Japan and the Netherlands, both US allies.
The China Ministry of Finance plans to contribute 60 billion yuan to the fund, while other participants are currently unknown. The fundraising process is expected to take several months, and it is unclear when the fund will be launched or if any additional changes will be made to the plan.
Prior funds of the Big Fund were financed by the Ministry of Finance and large state-owned companies. However, despite the investments, the Chinese semiconductor industry has not yet attained a leading position in the global supply chain, particularly in the advanced microchip sector.
The management of the capital fund may be entrusted to several financial institutions, including Sino-IC Capital, which managed the capital for the first two funds, despite an ongoing corruption investigation against some of its managers. Chinese officials have also begun negotiations with the investment unit of state corporation China Aerospace Science and Technology Corporation about potential participation in fund management.
Earlier this year, Chinese artificial intelligence giant BAIDU disregarded the US ban on exporting certain semiconductor technologies to China, stating that it would have no significant impact on the company’s AI operations and could actually expedite China’s drive for self-sufficiency in silicon technologies.
However, it was later revealed that Chinese companies subject to the US ban on acquiring American technologies were circumventing the restrictions by renting them from local cloud providers. Furthermore, Chinese artificial intelligence developers are facing high demand for NVIDIA A100 graphics processors, as they cannot afford to purchase their own video cards.