The Chips Industry has seen a tremendous shortage in the raw material in the past few years. Mainly from the 2020 and 2021 the industry faced major obstacles for raw material availability and found difficulty in production and manufacturing of the final products.
Semiconductors are the lifeblood for many industries in the economy. Majorly today when the world is going forward with AI, semiconductors have a major role to play. From the pandemic time the industry was disrupted as the major and dominated chip producing state China, which was affected by the COvid-19 significantly. These led to shutting down of many factories worldwide .
This article covers detailed information of China’s state fund plan and investment. Further we conclude the article by sharing the difficulty and challenges the industry is facing due to the shortage of the raw material worldwide and how the industry has a major role in the economy of the country.
Table of Contents
- A $40 billion state fund
- Big FUnd
- Investment Managers
- Fundraising Process
A $40 billion State Fund
In an effort to catch up to the United States and other competitors, sources claim that China is preparing to launch a new state-backed investment fund with a $40 billion funding goal for its chip industry.
Of the three funds the China Integrated Circuit Industry Investment Fund, often known as the Big Fund, has launched, it is most likely the largest.
Compared to similar funds in 2014 and 2019, which raised 138.7 billion yuan and 200 billion yuan, respectively, according to government estimates, this one aims to raise 300 billion yuan ($41 billion).
According to one of the two persons and a third person with knowledge of the situation, one of the major investment areas will be machinery for chip fabrication.
For a long time, President Xi Jinping has emphasised how important it is for China to become self-sufficient in semiconductors. This need has grown even more urgent because Washington implemented a number of export control regulations over the past few years, citing concerns that Beijing would exploit cutting-edge technology to improve its military prowess.
In October, the United States unveiled a comprehensive package of penalties that restricted China’s access to cutting-edge chip manufacturing machinery. U.S. allies Japan and the Netherlands also took similar action.
According to two of the people, Chinese authorities just approved the new fund.
According to one source, the Chinese finance ministry intends to provide 60 billion yuan. Other contributors weren’t immediately identifiable.
Since the conversations were private, all of the sources declined to be named.
Reuters’ requests for comment were not immediately answered by the State Council Information Office, which responds to media inquiries on behalf of the government, the finance ministry, or the Ministry of Industry and Information Technology.
Requests for comment from The Big Fund also did not receive a prompt response.
According to the first two sources, the fundraising process will probably take several months, and it is not yet known when the third fund will be formed or whether there will be any additional alterations to the plan.
The finance ministry and wealthy state-owned companies including China Development Bank Capital, China National Tobacco Corporation, and China Telecom supported the Big Fund’s first two funds.
The Big Fund
The Big Fund has financed a number of smaller businesses and funds over the years in addition to China’s two largest chip foundries, Semiconductor Manufacturing International Corporation (0981.HK) and Hua Hong Semiconductor (688347.SS) and flash memory manufacturer Yangtze Memory Technologies.
Despite these investments, the Chinese chip sector has found it difficult to hold a dominant position in the global supply chain, particularly for cutting-edge semiconductors.
According to the three persons, the Big Fund is thinking of engaging at least two institutions to manage the capital of the new fund.
China’s anti-graft bureau has been looking into a number of senior officials and former officials at SINO-IC Capital, the sole manager of the Big Fund’s first two funds, since 2021.
Nevertheless, according to two of the persons, SINO-IC Capital is anticipated to continue serving as one of the third fund’s managers.
An inquiry for comments was not immediately answered by SINO-IC Capital.
According to two of the persons, Chinese authorities have also contacted China Aerospace Investment, the investment division of the state-owned China Aerospace Science and Technology Corporation, to inquire about becoming one of the managers.
An inquiry for comment was not immediately answered by China Aerospace Investment.
The fundraising process would take a few months and the exact date of the launching was also not cleared.
The other funds financed by the Big Fund were Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor.
But still the industry has not shown major recovery and is still facing challenges.
The industry has seen a huge demand worldwide due to the extreme shortage in the industry. With these investments China can lead the chip industry market in the world. Though many other companies in other countries are also planning to invest in the chip industry and start the chip manufacturing business. In 2020 when the industry was facing issues with the availability, manufacturing of the cars, commercial vehicles and other related industry business was affected badly. Currently the availability of the raw material and chips in the world wide are comparatively better as more and more countries are putting their effort to increase the production and availability of the chips. Governments around the world have encouraged and supported the companies coming up to set up chip manufacturing plants to eliminate the shortage of the raw material and allow industry and related affected businesses to smoothly run the business and bring the trade and business on track.