China establishes $47.5 billion chip fund to boost self-reliance in semiconductor industry

China has taken a significant step towards achieving self-sufficiency in the semiconductor industry with the establishment of the country’s largest-ever investment fund. The National Integrated Circuit Industry Investment Fund, in its third phase, has secured a whopping 344 billion yuan ($47.5 billion) from the central government, state-owned banks, and enterprises.

The fund, incorporated on May 24, boasts the Ministry of Finance as its largest shareholder, with contributions also coming from investment firms owned by local governments in Shenzhen and Beijing. The move comes as China aims to reduce its reliance on imported semiconductor components, particularly in light of the U.S. sanctions that have hindered companies like Huawei Technologies.

In a global race for chip supremacy, major powers like the U.S. and the European Union have poured billions into semiconductor development. China, too, has been a significant player in this arena, using state capital to support local chipmakers such as Semiconductor Manufacturing International Corp. (SMIC).

The latest investment fund, dubbed Big Fund III, underscores Beijing’s commitment to building a robust semiconductor supply chain. This comes as the U.S. intensifies efforts to restrict China’s access to chip technology and urges allies to tighten export controls.

The news of the fund’s establishment has already had a positive impact on China’s chip stocks, with major players like SMIC and Hua Hong Semiconductor seeing significant gains in their share prices. The development signals a new chapter in China’s quest for technological independence and chip manufacturing prowess.