China to mobilise $27 Billion Chip Fund to counter US tech restrictions

China is mobilising a $27 billion Chip Fund known as the National Integrated Circuit Industry Investment Fund, commonly referred to as the Big Fund. The primary objective of this initiative is to strategically counter the growing technological constraints imposed by the United States, particularly in the semiconductor sector. Overseen by China’s tech ministry, the fund is designed to accelerate the development of cutting-edge technologies, aligning with China’s renewed commitment to self-reliance, echoing President Xi Jinping’s comprehensive “whole nation” approach.

Contributions to the fund are expected to come primarily from local governments and state-owned enterprises, with significant backers including the governments of Shanghai and other cities, China Chengtong Holdings Group, and State Development and Investment Corp. This financial support aligns with China’s renewed commitment to self-reliance, especially amid increased US efforts to rally allies such as the Netherlands, Germany, South Korea, and Japan to tighten export controls on China’s access to semiconductor technology.

Established in 2014, the Big Fund has played a pivotal role in providing financial support to local chipmakers, amassing around $45 billion in capital. Key beneficiaries include Semiconductor Manufacturing International Corp. (SMIC) and Yangtze Memory Technologies Co. Despite operational challenges and a temporary slowdown in investments following an anti-graft probe in 2022, the fund reactivated in 2023, investing over $10 billion in Changxin Xinqiao Memory Technologies Inc.

In essence, the Big Fund’s significance extends far beyond its monetary value. It symbolises China’s ambitious strides toward technological self-sufficiency and positions itself as a formidable player in the global semiconductor landscape, shaping the trajectory of the nation’s economic and technological ambitions.