China to launch $40 billion semiconductor chip fund to counter Biden tech war
Christopher Hutton
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China is expected to launch a state-backed investment fund providing more than $40 billion to the country’s semiconductor manufacturing industry to counter the policies implemented by the United States to favor domestic manufacturers.
The country is set to launch the new investment fund in the next few months, according to Reuters. The fund would be the largest state-backed investment fund to date and the third attempt funded by the Chinese government. The focus will be on purchasing equipment for chip manufacturing and would be a step toward China becoming self-sufficient for its chip-building needs. The fund would help China recover from U.S. export controls, which President Joe Biden implemented in October 2022 to restrict rivals’ access to the tools needed to make military-grade semiconductors.
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The fund was approved by Chinese officials in recent months, with the Chinese finance ministry contributing $8.2 billion. The fundraising process will take months.
Previous state-backed investment funds for the semiconductor industry raised $18.9 billion in 2014 and $27.4 billion in 2019. The funders are expected to include China Development Bank Capital, China National Tobacco Corporation, and China Telecom.
The fund will have to compete with other national efforts to bolster China’s competitors and their expansion of manufacturing. The United States passed the CHIPS Act in August 2022 to provide more than $52 billion to manufacturers like Intel to construct their own semiconductor manufacturing plants. The European Union approved the $47.5 billion CHIPS Act in July to help bolster its manufacturing capabilities in Europe.
Biden released an executive order in early August that restricted investments by U.S. companies in Chinese developers. This announcement, alongside nearly a year of export controls of chips, has severely restricted China’s access to high-end technology required for military development.
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The threat of falling behind the U.S. in technological innovation is considered a significant threat. China’s microchips could fall “at least five generations behind” their U.S. rivals due to Biden’s export controls, according to Gerald Yin, the CEO of Advanced Micro-Fabrication Equipment, China.
Nvidia, one of the world’s largest chipmakers, claimed the U.S. government limited its ability to sell chips in the Middle East out of fear of the technology being sold via a third party to China. The Commerce Department denied such claims.