China has been facing semicon-based sanctions for years now. However, that did not stop Huawei, China’s biggest smartphone developer and SMIC, China’s largest chipmaker from developing a chip on their own that is not only capable, but even faster and a better performer in certain areas.
Emboldened by the prowess of China’s domestic chip manufacturing and engineering industry, the CCP has taken a bold step in the hopes that it bolsters its semiconductor industry. China plans to create its largest-ever investment fund, hoping to achieve self-reliance in chip manufacturing despite ongoing efforts by the US to curb its growth.
The third phase of the National Integrated Circuit Industry Investment Fund has secured a whopping 344 billion yuan (approximately $47.5 billion) from the central government, as well as various state-owned banks and enterprises, including the Industrial & Commercial Bank of China Ltd.
This initiative, incorporated on May 24, is aimed at accelerating the development of the domestic chip industry.
Leading the charge is China’s Ministry of Finance, with investment firms backed by local governments in Shenzhen. Beijing is also contributing significantly to the fund.
The Shenzhen government, in particular, has been actively investing in chipmaking facilities in the Guangdong province, to reduce reliance on imported semiconductor components and support companies like Huawei & SMIC.
This move comes amidst a global race for chip supremacy, with major powers like the US and European Union pouring billions into semiconductor development. China has been a significant player in this arena, using state funds to support local chipmakers such as Semiconductor Manufacturing International Corp.
The establishment of Big Fund III highlights China’s determination to build a robust semiconductor supply chain on its own, particularly in light of escalating sanctions, tariffs and trade embargoes imposed by the US on China’s access to chip technology.
While the US is urging its allies to tighten export controls on China, it doesn’t seem to be working. Recently, NVIDIA decided to slash the prices of its China-specific neutered AI GPUs that the US allows them to sell to China. The reason behind NVIDIA slashing its prices can be largely attributed to Huawei’s latest chip offering.
Meanwhile, ASML, the world’s largest lithography and chipmaking equipment maker is also seeking ways to be able to continue their business with Chinese tech companies. Currently, ASML has had to abide by sanctions because of the Netherland’s commitment to the US-imposed restrictions.
However, Beijing is also doubling down on efforts to strengthen its semiconductor capabilities.
The announcement of the semiconductor fund has already had a positive impact on China’s chip stocks, with major players like SMIC and Hua Hong Semiconductor experiencing significant gains in the market.
However, amid China’s efforts to bolster its semiconductor industry, US companies like Applied Materials are facing scrutiny for their business dealings with Chinese firms. Applied Materials, a leading semiconductor equipment maker, has disclosed receiving subpoenas from the US Department of Commerce and other agencies regarding its shipments to China.
The company is under investigation for potentially violating export restrictions by supplying equipment to Semiconductor Manufacturing International Corporation (SMIC), China’s top chipmaker. This investigation highlights the growing tensions between the US and China in the semiconductor sector, as both countries vie for dominance in this critical industry.
Despite these challenges, China’s ambitious semiconductor fund underscores its commitment to achieving technological self-sufficiency and reducing dependence on foreign suppliers. As the global semiconductor race heats up, China’s strategic investments in chip manufacturing are poised to reshape the landscape of the industry in the years to come.
(With inputs from agencies)
