China is hellbent on competing with other foreign chipmakers and surpassing them in the semiconductor industry with its third state-backed investment fund.
The country aims to steer away from international dependence to carve its own name in this tech sector. This is also projected to boost its A-game to achieve chip sovereignty, according to TechCrunch.
China's Big Fund For Semiconductor Industry
The National Integrated Circuit Industry Investment Fund, known as "the Big Fund," has undergone impressive growth since it was built.
Big Fund I, active from 2014 to 2019, set the groundwork, while Big Fund II (2019 to 2024) expanded the initiative with increased investment. The newly established Big Fund III surpasses its predecessors with a massive 344 billion yuan (approximately $47.5 billion), reflecting China's intensified efforts to dominate semiconductor production.
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China's Drive for Semiconductor Self-Sufficiency
The substantial size of Big Fund III, exceeding expectations, signals that China won't stop until it becomes the top semiconductor country in the making.
This development follows Huawei's increased reliance on Chinese suppliers and highlights the ongoing chip war between China and Western nations.
Both sides aim to reduce dependence on each other, with China focusing on securing its supply chain.
What Taiwan Contributes to the Global Chip Industry
A major concern for China is Taiwan's dominance in chip manufacturing. Taiwan Semiconductor Manufacturing Co. (TSMC) produces around 90% of the world's most advanced chips. It's also the go-to chipmaker for big companies like Nvidia and Apple.
Control over Taiwan's semiconductor capabilities would significantly impact the U.S. and its allies. However, sources indicate that companies like ASML and TSMC have contingency plans to disable chip-making machines if China invades Taiwan.
What China's Chip Strategy Mean to US
China's advancements in chip production, especially in legacy chips used in cars and appliances, have drawn attention.
U.S. Commerce Secretary Gina Raimondo recently highlighted that China produces about 60% of these chips. The chip war encompasses both legacy and advanced chips, yielding mixed results.
U.S. policy, aimed at restricting China's access to cutting-edge technology, faces challenges and potential backfires like what IG's market analyst Hebe Chen said in a recent interview with Reuters.
Chen said that a semiconductor giant like Nvidia could be torn "between maintaining the Chinese market and navigating U.S. tensions."
The Big Fund Might Be Hindered By Internal Issues
The announcement of Big Fund III led to a surge in stock prices for Chinese semiconductor companies poised to benefit from the new capital. However, previous investments by Beijing have not always yielded the desired results.
Issues such as corruption and the slow pace of semiconductor development have posed challenges. The former head of the Big Fund was removed due to corruption, highlighting internal obstacles.
Despite these challenges, China remains committed to advancing its semiconductor capabilities. Meanwhile, Western innovations continue to evolve.
For example, French deep tech startup Diamfab is developing diamond semiconductors aimed at supporting the green transition in the automotive industry.
China's establishment of Big Fund III is a glaring sign that it's determined to achieve semiconductor independence. Of course, the chip war won't be an easy battle to conquer as more countries are already ahead of the race.
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