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China Sets Up Largest-Ever Semiconductor Investment Fund Amid US Restrictions

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China Sets Up Largest-Ever Semiconductor Investment Fund Amid US Restrictions

(CTN News) – According to a government-run body, China is establishing its largest-ever semiconductor state investment fund to further its dominance in future breakthrough technologies.

The $47.5 billion fund is being created as the US imposes extensive restrictions on selling American semiconductors and chip technology to curb Beijing’s ambitions.

The fund, which supports six significant state-owned banks, including ICBC and China Construction Bank, reflects Chinese President Xi Jinping’s efforts to enhance the nation’s position as a tech powerhouse.

Beijing’s Made in China 2025 roadmap aims to position China as a worldwide leader in various areas, including AI, 5G wireless, and quantum computing.

The China Integrated Circuit Industry Investment Fund is currently in its third phase. The “Big Fund,” as it is known, was officially launched in Beijing on Friday, according to the National Enterprise Credit Information Publicity System.

Following the announcement, shares of the biggest Chinese chipmakers surged. Semiconductor Manufacturing International Corporation (SMIC), the world’s third-largest contract chipmaker, is up 7% since Monday. Hua Hong Semiconductor, China’s second-largest chip foundry and a Huawei supplier, is up 13%.

The fund’s first phase began in 2014, with 138.7 billion yuan ($19.2 billion). The second phase began five years later, with a registered capital of 204.1 billion yuan ($28.2 billion).

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The Ministry of Industry and Information Technology launched the first phase of investments in 2014 to bring the country’s semiconductor industry to international standards by 2030. The investments will focus on chip manufacture, design, equipment, and materials.

In recent years, the “Big Fund” has faced corruption problems. In 2022, the country’s anti-graft authority struck down the semiconductor industry, questioning some of China’s senior executives at state-owned chip businesses.

In March, the country’s top prosecutor said that Lu Jun, former CEO of Sino IC Capital, which administered the “Big Fund,” had been indicted on bribery charges.

These controversies aren’t the only obstacles to Xi’s achieving technological self-sufficiency in China.

In October 2022, the US implemented export rules that prevented Chinese firms from purchasing advanced processors and chip-making equipment without a license. The Biden administration has also urged its allies, like the Netherlands and Japan, to impose their limitations.

Last year, Beijing imposed export limits on two key raw materials for the global chipmaking industry.

The new chip fund is not simply a defensive measure to offset Western sanctions but reflects Xi’s long-held aim to make China a technological leader.

Last year, Chinese’s Huawei surprised industry professionals by introducing a new smartphone with an SMIC 7-nanometer processor.

Analysts couldn’t fathom how Huawei would have the technology to create such a chip after the US took massive measures to limit China’s access to foreign technologies.

In March, during a meeting with Dutch Prime Minister Mark Rutte, Xi stated that “no force can stop China’s scientific and technological development.”

ASML, the world’s sole manufacturer of extreme ultraviolet lithography machines used to fabricate sophisticated semiconductors, is based in the Netherlands. In January, the Dutch authorities stopped the business from sending certain lithography machines to China.

Arsi Mughal is a staff writer at CTN News, delivering insightful and engaging content on a wide range of topics. With a knack for clear and concise writing, he crafts articles that resonate with readers. Arsi's pieces are well-researched, informative, and presented in a straightforward manner, making complex subjects accessible to a broad audience. His writing style strikes the perfect balance between professionalism and casual approachability, ensuring an enjoyable reading experience.

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