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China establishes $47B semiconductor fund to compete with US dominance

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China 47B semiconductor fund to compete US dominance

China announced a new semiconductor fund worth $47 billion to boost its chip industry, according to a government-run credit information agency.

This assertive action is perceived as a retaliation for US attempts to restrict China's access to cutting-edge semiconductor technology.

The China Integrated Circuit Investment Fund Phase III is the largest investment to date. It was filed on May 24th. The previous two phases were smaller. In 2014, the investment was 204 billion yuan and in 2019 it was 138.7 billion yuan.

The state-owned National Development Bank's subsidiary owns 10.5% of the fund. The Shanghai municipal government investment business owns 9% and the Ministry of Finance owns 17%.

Five major banks in China, including Bank of China, Agricultural Bank of China, China Construction Bank, Bank of Communications, and Industrial and Commercial Bank of China, are also investors in the fund. Together, these banks have a six percent stake in the venture.

The China Integrated Circuit Investment Fund, also known as "Big Fund," was created in 2015 to help develop high-tech industries as part of the "Made in China 2025" initiative.

China's prominent chip manufacturers, including Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, have already gained financial advantages from the "Big Fund."

The investment fund is expected to support the HBM sector and other significant AI semiconductor fields, according to Qichacha, a Chinese corporate information service.

In the third phase, the fund will focus on semiconductors related to artificial intelligence and manufacturing equipment, but specific targets are still unknown. The fund will help major Chinese semiconductor companies transition to using domestic suppliers instead of foreign ones for crucial materials like industrial gases, chemicals, and silicon wafers. It will also support R&D projects. By doing this, China's dependency on outside sources will be reduced, and future US sanctions may become less effective.

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