China plans to launch a new state-backed investment fund aimed at raising about $40 billion for the semiconductor industry, people familiar with the matter said in recent days. This will be the third fund launched by China Integrated Circuit Industry Investment Fund (Big Fund), and it may also be the largest. The planned capital raising target is 300 billion yuan, exceeding the two funds launched in 2014 and 2019, which raised 138.7 billion yuan and 200 billion yuan respectively.
The main investment area of the new fund will be chip manufacturing equipment, which is a shortcoming of China's chip industry, which currently relies mainly on imports. However, investment in this area is particularly important as countries such as the United States have implemented export controls that restrict China's access to advanced chip manufacturing equipment.
In the past few years, the Chinese government has invested US$150 billion in the domestic IC industry through various channels and proposed the goal of "Made in China 2025", which is to achieve a 70% localization rate by 2025.
According to data provided by industry association Semi, China's orders for chip manufacturing equipment from overseas suppliers increased by 58% in 2021, becoming the largest market for these products for the second consecutive year. At the same time, China is building a large number of new fabs, with 17 new fabs expected to start construction between 2021 and 2023. The total installed capacity of China's local chipmakers is also increasing.
Preparations for the new fund have been approved by relevant authorities in recent months, with one of the sources saying China's Ministry of Finance plans to invest 60 billion yuan, while other funders are unknown.
Contributors to the first two funds of the big fund include the Ministry of Finance and some well-funded state-owned enterprises, such as China Development Bank Capital, China Tobacco Corporation and China Telecom.
The launch of this new fund shows China's determination and confidence in developing its local chip industry, and is also a response to pressure and sanctions imposed by the United States.
Looking back at the layout direction of the first and second phases of the big fund, it is not difficult to find China's firm determination to strive to achieve "localization". On June 24, 2014, the Chinese government issued the "National Integrated Circuit Industry Development and Promotion Outline", and in September of the same year The National Integrated Circuit Industry Investment Fund was established to focus on investing in the integrated circuit chip manufacturing industry, taking into account chip design, packaging and testing, equipment and materials and other industries. It raised 138.7 billion yuan in the first phase.
Compared with the first phase, the capital scale of the second phase of the big fund has been significantly increased, and the sources of funds are more diverse. The second phase of the Big Fund attracted investments from various sources including central fiscal funds, local government background funds, central enterprise funds, private enterprise funds, and integrated circuit funds. Among them, the Ministry of Finance invested 22.5 billion yuan, accounting for 11.02%, and China Tobacco subscribed 150 billion, and the three major operators collectively contributed 12.5 billion yuan.
After the establishment of the "Big Fund Phase II", the process of "independent control" of domestic chips is expected to accelerate, focusing on leading stocks in the beneficiary industries, focusing on chip manufacturing and equipment materials, chip design, packaging and testing and other aspects of the industry chain, and supporting the backbone of the industry Leading enterprises become bigger and stronger. The second phase mainly focuses on the layout of etching machines, thin film equipment, testing equipment, cleaning equipment and other fields.
Over the past two years, the United States has introduced a series of export control measures that have cut off China's supply of advanced chip manufacturing equipment and design software and restricted the sale of chips by some Chinese companies to the global supply chain. These measures have brought great challenges to China's chip industry, but also stimulated China's drive for independent innovation and self-sufficiency.
China's chip industry is rising rapidly, not only making breakthroughs in manufacturing technology, but also demonstrating strength in design capabilities. China's chip industry is cultivating and attracting more talents and innovative forces, while expanding and deepening international cooperation, bringing new vitality and opportunities to the global chip industry.
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