Tech war: China’s Big Fund III brings US$47.5 billion in fresh outlay for nation’s semiconductor supply chain, analysts say

China’s largest-ever chip investment fund is expected to bolster Beijing’s support for the nation’s leading contract semiconductor manufacturers and other enterprises in the value chain, including equipment and material suppliers, according to analysts.

The third phase of the China Integrated Circuit Industry Investment Fund, also known as the “Big Fund”, was established last week with a registered capital of 344 billion yuan (US$47.5 billion) as part of the country’s efforts to build a self-sufficient semiconductor sector.

The fund is aimed at enhancing the nation’s “ability to supply [semiconductors] internally”, reinforcing Beijing’s goal to “build up the capability and strengths” of this industry, despite mounting US tech sanctions, Randy Abrams, the head of Taiwan research at Swiss investment bank UBS, said on Wednesday.

While mainland chip foundries such as Semiconductor Manufacturing International Corp and Hua Hong Semiconductor are expected to benefit from the latest funding resource, Abrams said: “There will be some [investments] on capacity, equipment and materials, as well as investments tied to advanced packaging.”

The size of the new fund – roughly on par with the US$53 billion in incentives under the Chips and Science Act, which was enacted by US President Joe Biden in 2022 – reflects the massive backing from state-owned enterprises and Beijing’s “whole nation” approach to building a self-sufficient semiconductor industry amid Washington’s tech export restrictions.