China Allocates $47.5 Billion to Boost Semiconductor Industry Amid U.S. Restrictions
China is intensifying its efforts to become a leader in advanced technologies by establishing its largest-ever state investment fund for the semiconductor industry, worth $47.5 billion. This move comes as the United States imposes stringent export restrictions on American chips and related technologies to curb Beijing’s technological ambitions.
The new fund, backed by six of China’s major state-owned banks including ICBC and China Construction Bank, underscores President Xi Jinping’s commitment to advancing China’s technological capabilities. This initiative aligns with China’s “Made in China 2025” strategy, which aims to position the nation as a global leader in sectors like artificial intelligence (AI), 5G wireless, and quantum computing.
This investment marks the third phase of the China Integrated Circuit Industry Investment Fund, commonly referred to as the “Big Fund.” The fund’s establishment in Beijing was confirmed by the National Enterprise Credit Information Publicity System on Friday. The first phase of the fund was created in 2014 with 138.7 billion yuan ($19.2 billion), followed by a second phase in 2019 with 204.1 billion yuan ($28.2 billion).
The fund’s primary objective is to elevate China’s semiconductor industry to international standards by 2030, focusing on chip manufacturing, design, equipment, and materials. Despite its ambitious goals, the “Big Fund” has faced significant challenges, including corruption scandals. In 2022, an anti-corruption crackdown targeted top figures in state-owned chip companies, leading to the indictment of Lu Jun, former CEO of Sino IC Capital, on bribery charges.
In addition to internal issues, China’s semiconductor ambitions face external obstacles. The U.S. introduced comprehensive export controls in October 2022, limiting Chinese companies’ access to advanced chips and manufacturing equipment without special licenses. The Biden administration has also urged allies like the Netherlands and Japan to implement similar restrictions. In response, Beijing imposed export controls on key raw materials essential for global chip production.
This substantial investment is part of Xi’s broader vision to achieve technological self-reliance and counteract Western sanctions. Last year, China’s Huawei surprised the industry by launching a new smartphone featuring a 7-nanometer processor produced by the Semiconductor Manufacturing International Corporation (SMIC), despite U.S. efforts to limit China’s access to advanced technologies.
During a meeting with Dutch Prime Minister Mark Rutte in March, Xi emphasized that “no force can stop China’s scientific and technological development.” The Netherlands, home to ASML, the only company that manufactures extreme ultraviolet lithography machines needed for advanced semiconductor production, has restricted exports of some machines to China at the behest of its government.
China’s latest financial commitment reflects its determination to secure a leading position in the global tech landscape, despite facing significant geopolitical and domestic challenges.
