China is investing $47.5 billion more in its chip sector

This latest investment will finance chip production equipment in China

Published reports show that China continues to finance its semiconductor industry through third-country-backed investment. The latest round of financing was officially established on May 24 and amounts to 344 billion yuan ($47.5 billion) and focuses on chipmaking equipment.

Like the first two rounds of chip financing, this one is also part of China’s integrated circuit industry investment fund, founded in 2014 and known as the “large fund.” The first phase of the fund distributed 138.7 billion yuan, followed by a second round of financing in 2019 that amounted to 204 billion yuan. In addition to the country’s finance ministry – which has a 17% stake – there are seventeen other investors, five of which are large Chinese banks.

Notable recipients of the funds include chip foundries Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor.

Last week, South Korean President Yoon Suk Yeol characterized the international semiconductor space as “total war.” It is true that China is not alone in investing billions to stay on top, especially as the growing demand for advanced chips in areas such as artificial intelligence becomes increasingly clear. For example, South Korea announced $19 billion in funding for domestic semiconductor companies, with a focus on chip design and contract manufacturing, while Belgian nanoelectronics R&D center imec announced that research labs in Europe would receive 2.5 billion euros ($2.72 billion) in funding under the European Chip Act, announced in 2023. Earlier this month, China’s archrival the United States said it was seeking proposals from eligible applicants to develop, validate and the use of digital twins for semiconductor production, advanced packaging, assembly and testing processes.