Expanded funds fuel China's advancement in the semiconductor sector
The global race for semiconductor supremacy has intensified with the Biden administration's restrictions on advanced chips and chipmaking equipment. In response, China has announced its largest-ever semiconductor investment fund, named Big Fund III, with a total of RMB 344 billion (USD 47.5 billion).
Big Fund III, the third phase of the National Integrated Circuit Industry Investment Fund, focuses on investments in chip manufacturing equipment and the development of less-advanced chipmaking capabilities. The primary goal is to build a robust domestic supply chain for China's semiconductor industry and bolster its domestic chip industry.
China's Ministry of Finance holds a 17.4% stake in Big Fund III, while the remaining contributors include state-owned banks and enterprises. However, specific details about other investors and the sizes of their stakes are not publicly disclosed.
The fund's creation is a response to the US tightening its grip on technology exports to China, citing national security concerns. China is eager to support local chipmakers and reduce reliance on foreign technology with Big Fund III. By fostering innovation and supporting companies like Huawei, China aims to mitigate the impact of US export controls.
Despite these efforts, Big Fund III has faced criticism for its lack of transparency and accountability. Past phases of the fund have been marred by corruption scandals and inefficiencies, and investigations into alleged graft involving fund officials have raised concerns about the effective use of these massive investments.
Nevertheless, the fund has been instrumental in buoying market confidence and driving China's semiconductor ambitions forward. Previous phases of the fund supported key projects and companies like Semiconductor Manufacturing International Corporation (SMIC), Hua Hong Semiconductor, and Advanced Micro-Fabrication Equipment (AMEC).
Part of China's motivation for creating Big Fund III is to achieve self-sufficiency in science and technology. The 'Made in China 2025' initiative has seen China aggressively fund its semiconductor sector as part of its broader strategy to become a global leader in technology.
In conclusion, Big Fund III marks a significant step in China's ongoing efforts to bolster its domestic chip industry and reduce reliance on foreign technology. As the global race for semiconductor supremacy continues, the impact of Big Fund III on China's technological self-sufficiency and global standing remains to be seen.
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