China Allocates $47.5 Billion, Its Largest Ever, to Ramp Up Domestic Chip Manufacturing

China has recently unveiled its largest-ever semiconductor investment fund, worth $47.5 billion.

This major funding supports the country's efforts to achieve self-sufficiency in the chip industry, particularly as tensions with the United States escalate.

China Doubles Down on Local Chip Industry with Largest-ever Funding

The new investment fund, formally known as the China Integrated Circuit Industry Investment Fund Phase III, was established on May 24.

This fund aims to boost domestic chip manufacturing capabilities, crucial for various high-tech industries, including artificial intelligence (AI), 5G wireless networks, and quantum computing.

Bloomberg reports that the fund has amassed 344 billion yuan from a mix of the central government and six major state-owned banks, including the Industrial and Commercial Bank of China (ICBC) and China Construction Bank.

Local government investment firms from cities like Shenzhen and Beijing also contributed, emphasizing the nationwide commitment to this initiative.

This latest phase builds on two previous rounds of funding: the first phase, launched in 2014, with an investment of 138.7 billion yuan ($19.2 billion), and the second phase in 2019, which saw a substantial increase to 204.1 billion yuan ($28.2 billion).

China Resists Intensifying US Restrictions with New Investment

China's push comes in response to significant challenges the United States poses. In recent years, the US has imposed stringent export controls, restricting Chinese companies' access to advanced chips and chip-making technology.

Earlier this month, President Biden announced that tariffs on roughly $18 billion in Chinese technology goods would be quadrupled. The tariffs, which will go into effect over the next two years, target several products, including chips, batteries, and solar cells.

The Biden administration has also urged allies, including the Netherlands and Japan, to implement similar restrictions. These measures curb China's technological advancements, particularly in sectors with potential military applications.

In retaliation, Beijing has recently imposed export controls on critical raw materials essential for global chip manufacturing, signaling its resolve to counteract Western sanctions. The new fund is a defensive measure and part of President Xi Jinping's long-term vision to make China a global technology powerhouse.

Xi's strategy, outlined in the Made in China 2025 initiative, aims for China to lead in various high-tech fields by 2030. The semiconductor fund will primarily support chip manufacturing, design, equipment, and materials.

Despite aggressive US tech sanctions, Chinese tech giant Huawei launched a smartphone earlier this year with a 7-nanometer processor developed by Semiconductor Manufacturing International Corporation (SMIC). Many analysts were surprised by the development, given extensive efforts to limit China's access to foreign technology.

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