China is setting up a third fund with $47.5 billion to support the semiconductor sector

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BEIJING (Reuters): China has set up a third planned state-backed investment fund with registered capital of 344 billion yuan ($47.5 billion) to boost its semiconductor industry.

The hundreds of billions of yuan invested in the sector demonstrate President Xi Jinping’s drive to achieve China’s self-sufficiency in semiconductors.

That commitment has taken on even greater urgency after the United States imposed a series of export controls over the past few years, citing concerns that Beijing could use advanced chips to enhance its military capabilities.

Chinese chip stocks rose, with the CES CN Semiconductor Index rising more than 3% for its biggest one-day gain in more than a month.

The third phase of the China Integrated Circuit Industry Investment Fund was officially established on May 24 and registered with the Beijing Municipal Administration of Market Regulation, according to the National Enterprise Credit Information Publicity System, a government-run credit reporting agency.

The third phase will be the largest of three funds launched by China’s integrated circuit industry investment fund, known as the “large fund.”

According to Tianyancha, a Chinese enterprise information database company, the largest shareholder is China’s Ministry of Finance, with a 17% stake and a paid-up capital of 60 billion yuan. The second largest shareholder is China Development Bank Capital with a 10.5% share.

The Ministry of Finance did not immediately respond to a Reuters request for comment

Seventeen other entities are listed as investors, including five major Chinese banks: Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China and Bank of Communications, each contributing about 6% of the total capital.

In September, Reuters reported that China would launch the third phase of the Grand Fund.

The first phase of the fund was established in 2014 with a registered capital of 138.7 billion yuan, and the second phase followed in 2019 with an amount of 204 billion yuan.

The Big Fund provided financing to China’s two largest chip makers, Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, as well as flash memory maker Yangtze Memory Technologies, as well as a number of smaller companies and funds.

In September, Reuters reported that one of the main areas that the third stage of the fund will focus on is chip production equipment. The Large Fund is also considering employing at least two institutions to invest capital from the third stage.

($1 = 7.2449 yuan)

(Reporting by Beijing Newsroom; Editing by Tom Hogue, Christian Schmollinger and Shri Navaratnam)