China Launches a $47.5 Billion Fund to Bolster AI Chip and other Semiconductor Industry

Six of China’s largest state-owned banks poured a total of RMB114 billion, or 33.14% of equity capital, in the Big Fund III, which was expected to focus on sectors hit by the US restrictions most.

TMTPost -- China launches a new fund with multi-billion dollars to bolster the semiconductor industry amid increasing tech curbs from the Western world.

Credit:Xinhua News Agency

Credit:Xinhua News Agency

The China Integrated Circuit Industry Investment Fund, a state-owned investment company also know as the Big Fund, has established a limited liability company called the third phase of National Integrated Circuit Industry Investment Fund on May 24, according to the National Enterprise Credit Information Publicity System (NECIPS), a Chinese governmental credit information agency.

With a registered capital of RMB344 billion (US$47.5 billioin), the new fund, or the Big Fund III, has been allowed to engage in private equity investment fund management, venture capital fund management services, activities backed by private equity funds like equity investment and asset management and corporate management consulting, NECIPS showed.

The Big Fund III has 19 shareholders including the Ministry of Finance, six of China’s largest state-owned banks and various state-backed entities like China Development Bank Capital Corporation Ltd, a unit of China Development Bank is a policy bank of China under the State Council. The shareholders of six major banks include the  Industrial and Commercial Bank of China Co., Ltd. (ICBC), China Construction Bank Corporation (CCB), Agricultural Bank of China Co., Ltd.(ABC), Bank of China Co., Ltd. (BOC), Bank of Communications Co., Ltd. (BOCOM) and Postal Savings Bank of China Co., Ltd (PSBC). These banks poured a total of RMB114 billion, or 33.14% of equity capital. Among them, ICBC, CCB, ABC and BOC each invested RMB21.5 billion, BOCOM and PSBC input RMB20 billion and RMB8 billion, respectively.

The Big Fund was founded in 2014 to boost the value chain of the integrated circuit industry, which involves chip design, production, packaging and testing.The Big Fund III seems much larger than the previous two. The Big Fund II is twice as big as the first phase at RMB204.15 billion. The fund has invested more than RMB60 billion in more than 40 semiconductor firms since its establishment in 2019, according to Chinese newspaper Securities Times last December. Compared with the first phase, which focused on chip manufacturing, Big Fund II seems to have increased investment in key links of the industry chain, including chip design, equipment, components and raw materials, Fu Liang, an independent tech analyst, told the state-backed media outlet Global Times that month.

Chinese brokerage companies expected the Big Fund III will mainly invest in the cutting edge tech in the semiconductor industry. The sectors hit by the U.S. restrictions most are expected to be focus of the latest fund, such as artificial intelligence (AI) chips, advanced semiconductor equipments, especially lithography machines, and semiconductor materials like photoresists, according to a note of AVIC Securities Co., Ltd. Besides support for semiconductor equipments and materials, the Big Fund III is more likely to go toward High Bandwidth Memory (HBM) and other high value-added Dynamic random-access memory (DRAM) chips, China Fortune Securities Co., Ltd said.

The Big Fund III has amassed much more from the government and the state-run enterprises and banks than previous report. Bloomberg cited sources in March that the Big Fund was under the way to raise more than RMB200 billion for its third vehicle. One of the sources said the central government will contribute a fraction as most of the capital for the Big Fund III will come from local governments, their investment arms and state-owned enterprises. The person also said China now targets a pool of valuable capital across the country for major projects.

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