Beijing is “redoubling its efforts” in its quest to have China manufacture its own chips for billions more Investment round In the China Integrated Circuit Industry Investment Fund, known by its nickname “Big Fund”. The latest fund pledged as much money as the previous two rounds combined.
Previous efforts to build the chip industry have had mixed results, with some notable failures and corruption scandals. But the notable successes of domestic chipmakers and expanded efforts by the United States to bring China's semiconductor sector to its knees could spur Beijing to invest more money in the semiconductor sector and foster more domestic chipmaking champions.
The third “big fund” in China is headed by the Ministry of Finance, which has the largest share. It has been joined by a group of state-owned banks and investment companies linked to local governments.
The 344 billion yuan ($47.5 billion) raised for Big Fund III is the largest tranche of funding since the initiative began in 2014. The previous two funds raised 138.7 billion yuan ($19.5 billion) in 2014 and 204.1 billion yuan ($28.7 billion). ) in 2019.
China's third super fund is roughly the size of Washington's CHIPS Act, which provided $53 billion in incentives to encourage chip companies to manufacture leading chips in the United States. Many other governments, including Japan, Germany, South Korea and India, are also participating in this project. It has pledged billions of dollars to the domestic chip industry, and the artificial intelligence boom is boosting demand for advanced logic and memory chips as well.
“This move indicates that Beijing is now more confident that China will make tangible progress in the semiconductor field,” says Linghao Bao, a senior analyst at policy research firm Trivium China. “The size of the fundraising speaks for itself.”
However, the past two rounds of investments led by the super fund have provided mixed results, with notable successes and scandals.
Some recipients of Chinese government funds, such as Semiconductor Manufacturing International Corporation (SMIC) or Yangtze Memory Technologies Co (YMTC), have become important players in the Chinese market.
SMIC Manufacturer The advanced 7nm chip powers Huawei's Mate 60 series smartphones, which were released last August. The phone's launch surprised both analysts and the Biden administration, as it was believed that strict export controls would have prevented China's ability to produce such a chip domestically.
SMIC is said to be the largest foundry in China does not work On Huawei's 5nm chip. (SMIC was placed on the US Entity List, which prohibits the export of US technologies to these blacklisted companies, in December 2020.)
YMTC, the largest memory chip manufacturer in China Provides memory chips For Huawei's Pura 70 series smartphones, which were released earlier this year. YMTC was on track to challenge established memory chip makers such as US-based Micron Technologies and South Korea's SK Hynix, but was derailed by Washington's decision to put it on a trade blacklist in December 2022.
But while these two companies are the most prominent examples of the fund's big successes, the fund has also seen its share of scandals.
Beijing It has been investigated Chip executives, fund managers, and even government officials have been accused of wasteful spending and corruption. In 2022, the country's anti-corruption body announced investigations into both the head of the large fund and the CEO of the investment company that manages the investment itself. Prosecutors Accused The latter was charged with bribery in March.
The failure of a foundry in Wuhan highlights the challenge of developing China's semiconductor industry.
Wuhan Hongxin Semiconductor Industry, With support from the Wuhan governmentHe once had ambitions Leading competition Chipmakers such as Taiwan Semiconductor Manufacturing Company and Samsung Electronics have even attracted one of Taiwan's most famous semiconductor engineers to work for the Chinese company. The company was supported by the Wuhan government. that it Ambition was supported By the Wuhan government and construction of the company's facilities in Wuhan began in early 2018. But despite three years of investment, the company close In June 2021 without a single chip being produced commercially, malpractices and fraud over the three-year period led to a huge financing gap.
Beijing's push to build a domestic chip industry has been gaining intensity in recent years, as the United States and its allies try to restrict the export of advanced chips and chipmaking tools to China.
Many of these instruments, such as extreme UV machines made by Dutch company ASML Holdings, are highly specialized and made by a handful of non-Chinese companies. The Biden administration is pressuring governments in Japan and the Netherlands to stop providing high-tech equipment and services to Chinese companies.
But Bao points out that Washington's campaign to weaken China's chip industry could backfire. He says US export controls make Chinese companies “more willing to look for local alternatives.”
For example, Chinese technology companies like Alibaba It said Nvidia is eyeing Huawei as a potential supplier of AI chips, after US rules banned Nvidia from selling its flagship products to Chinese companies.
“The industry needs more money to support innovation. Doubling down is the right move,” Bao said.
