Big Fund III: China pumps another 44 billion euros into semiconductors
The Chinese sovereign wealth fund for chip companies is set to enter a third round. The sanctions are putting China in a tough spot.
(Image: Superstar / Shutterstock)
The Chinese government, together with local banks and investors, is apparently setting up another sovereign wealth fund for the semiconductor industry. Those responsible are raising 344 billion yuan, the equivalent of around 44 billion euros.
This was reported by the Chinese business publication Caixin and the South China Morning Post, citing the Qichacha commercial register. The Chinese Ministry of Finance (17.4 %), China Development Bank Capital (10.5 %), Shanghai Guesheng Group (8.7 %) and China Construction Bank (6.3 %) are among the 19 investors.
This is the third iteration of the National Integrated Circuit Industry Investment Fund, commonly known as the Big Fund. It started in 2014 with 138.7 billion yuan and was continued in 2019 with 204 billion yuan. At today's exchange rate, all three investment rounds add up to 87 billion euros.
China needs lithography systems
Preparations for Big Fund III have been underway since the summer of 2023, when further export restrictions to China emerged and have since come into force. This particularly affects lithography systems from global market leader ASML. The manufacturer is only allowed to sell technically outdated imagesetters to China, which significantly slows down the development of new production processes. However, Chinese companies with old production generations, so-called mature nodes, remain important customers for ASML.
While the Chinese flagship chip contract manufacturer SMIC was recently able to bring a 7-nanometer process to series production with the help of ASML's lithography systems, China is now facing a mammoth project: lithography systems that use extreme ultraviolet (EUV) exposure technology for the finest chip structures are so complex that not even established companies such as Canon or Nikon are able to mass-produce such imagesetters.
However, in order not to fall behind technologically, China must create a manufacturer for lithography systems from scratch. Huawei, among others, is said to be researching EUV technology.
Sunny and dark sides
One success story of the big funds is the memory manufacturer Yangtze Memory Technologies Corp (YMTC), whose NAND flash components can keep up with those of Samsung, Micron and SK Hynix – for fast NVMe SSDs, for example. But there is also Chinese DRAM, from ChangXin Memory Technologies (CXMT).
On the downside, the previous big funds have been plagued by corruption and bankruptcies worth billions. The largest insolvency was probably that of chip contract manufacturer Hongxin Semiconductor Manufacturing Company (HSMC) in 2020. One problem is said to lie in the rigid hierarchies – many decision-makers simply have little knowledge of semiconductors.
In the summer of 2022, China arrested several senior managers at Big Fund II due to allegations of corruption. The investment structure of Big Fund III is to be improved – but no details are known.
(mma)