The Big Fund III will be used for large-scale wafer manufacturing and the production of High Bandwidth Memory chips, used in AI, 5G, IoT, and more. Despite this, past investments have not always been successful, with China struggling to develop semiconductors that could replace U.S. circuitry. The fund's size, backed by six major state-owned banks, exceeds the $39 billion that the U.S. government will dedicate to chip manufacturing as part of the CHIPS Act, but falls short of the total federal funding of $280 billion. The announcement of the fund led to a rally in stocks from Chinese semiconductor companies.
Key takeaways:
- China has closed a third state-backed investment fund, known as 'the Big Fund III', to bolster its semiconductor industry and reduce reliance on other nations. The fund is larger than its two predecessors, amounting to 344 billion yuan, or about $47.5 billion.
- The size of Big Fund III confirms China's aim to achieve self-sufficiency in semiconductor production, amidst the ongoing chip war with the West. China is currently producing about 60% of legacy chips, which are found in cars and appliances.
- Despite the large investment, China's past investments in the semiconductor industry have not always been successful, with top leadership expressing frustration over the failure to develop semiconductors that could replace U.S. circuitry.
- While China is focusing on bolstering its own semiconductor industry, Western countries are also making strides in the field. For instance, French deep tech startup Diamfab is working on diamond semiconductors that could support green transition, particularly in the automotive industry.