The importance of the semiconductor industry has probably never been as great as it has been in the last few years. The world’s two largest economies – the USA and China – do not want, or even cannot tolerate, losing their dominance in this field or facing the risk of being left behind. The USA began to impose a series of sanctions to both consolidate its dominance and restrain China and its semiconductor industry, which are becoming increasingly aggressive. As China’s access to the latest semiconductor technologies is severely limited, the country is launching a $40 billion fund to revitalize its industry.China allocates $40 billion for semiconductors
The $40 billion fund in question looks set to be the largest of three funds launched by the China Integrated Circuit Industry Investment Fund (also known as the Large Fund). The targeted 300 billion yuan ($41 billion) vastly outpaces similar funds that raised 138.7 billion yuan and 200 billion yuan in 2014 and 2019, respectively.
China has not officially confirmed this funding, but according to people with knowledge of the matter, the main focus of the investment will be the development of equipment necessary for chip production. Under US sanctions, China does not have access to EUV technology. The only way for China, which cannot supply equipment, is to produce its own equipment. Of course, bringing the equipment to the same level as current competitors will be a long, laborious and costly task. However, China is probably the only country that can do this with its own means.
President Xi Jinping has long emphasized that China must achieve self-sufficiency in semiconductors. This need has become even more urgent after Washington implemented a series of export control measures over the past few years out of fear that Beijing could use advanced chips to boost its military, quantum computing and artificial intelligence capabilities. In October, the United States imposed a sweeping sanctions package cutting off China’s access to advanced chipmaking equipment, and U.S. allies Japan and the Netherlands have taken similar steps.However, according to unofficial information, the targeted fund was approved by the authorities in recent months and the Chinese Ministry of Finance contributed 60 billion yuan ($8.2 billion) to this fund. Other contributors are unclear.
Previous investments
As we said above, two major investments have been made within the scope of the Big Fund so far. Over the years, the Big Fund has provided financing for China’s two largest chip foundries, Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor (HHS), as well as flash memory maker Yangtze Memory Technologies and a number of smaller companies. Meanwhile, SMIC is of great importance for China and Chinese companies. We recommend that you read our relevant news below in this context.
On the other hand, despite the investments made so far, China’s chip industry is struggling to play a leading role in the global supply chain, especially for advanced chips. There is a possibility that China will close the gap thanks to this investment. Currently, “technology” is growing exponentially around artificial intelligence and advanced chips. While advanced chips are gaining ground in every field, from automobiles to phones, they are also the driving force for artificial intelligence.
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