China joins the race to invest into domestic semiconductor production

News Analysis




China joins the race to invest into domestic semiconductor production

After two funding phases back in 2014 and 2019, China’s third phase of generating capital for its domestic semiconductor industry accumulated US$47.5Bn in funding.

China's third state-backed investment fund aimed at strengthening the domestic semiconductor industry of $47.5Bn (RMB344BnRMB), nearly equals the combined $48.01Bn (RMB347.7Bn) fund raised in 2014 and 2019.

The Chinese Ministry of Finance is the largest shareholder, holding a 17% stake. The China Development Bank Capital is the second largest investor, holding a 10.5% stake. Additional funding, comprising around 30% of the total capital, comes from other major Chinese banks.

This latest fund will focus on acquiring equipment for chip manufacturing and developing high-end chip-making facilities to meet both domestic and international demand. The leading beneficiaries of this investment include Semiconductor Manufacturing International Corp. and Hua Hong Semiconductor.

Major investments into domestic semiconductor production have been announced within the past two years by governments looking to benefit from and secure supply chains for increasing demand of high-tech chips. The US has recently announced the recipients of funding and government loans including TSMC, Intel, and even Samsung. South Korea announced a large cluster totalling over US$470Bn in funding for major semiconductor producers, and the EU has also approved its own Chips Act which seeks to mobilise US$40Bn in funding for chip production.

However, aside from the US and China, other players have yet to finalise any meaningful investment opportunities.