China's chip fund gets 344 billion yuan boost

China has set up the country's largest-ever semiconductor investment fund to propel development of its domestic chip industry, the latest effort from Beijing to achieve self-sufficiency as the US seeks to restrict its growth.

The third phase of the National Integrated Circuit Industry Investment Fund has amassed 344 billion yuan (HK$370.78 billion) from the central government and various state-owned banks and enterprises, according to Tianyancha, an online platform that aggregates official company registration information.

The fund was incorporated on May 24.

The six largest state banks revealed their contributions as well.

The Industrial & Commercial Bank of China (1398), Bank of China (3988), China Construction Bank (0939) and Agricultural Bank Of China (1288) each proposed to inject 21.5 billion yuan, plus 20 billion yuan from the Bank of Communications (3328) and 8 billion yuan from the Postal Savings Bank of China (1658).

This latest investment vehicle, known as Big Fund III, underscores a renewed push from President Xi Jinping's government to build its own semiconductor industry as tensions with the US escalate. The Biden administration has imposed sweeping restrictions on China's ability to buy advanced chips and chipmaking equipment and is now urging allies - including the Netherlands, Germany, South Korea and Japan - to further tighten curbs on China and plug holes in existing export controls.

Shares of China's major chip stocks jumped yesterday. SMIC (0981), the largest chipmaker in China, closed 7.4 percent higher while Hua Hong Semiconductor (1347), a smaller competitor, climbed more than 11 percent.

The largest shareholder in the latest fund is China's Ministry of Finance, with investment firms owned by local governments in Shenzhen and Beijing also contributing.

The national chip fund was inaugurated about a decade ago with roughly 100 billion yuan in investable capital and doubled in size during its second phase amid the race against the US. But Beijing's generous investments haven't always paid off.

China's top leadership has been frustrated with a years-long failure to develop semiconductors that could replace US circuitry. In addition, the former boss of the Big Fund has been removed and is under investigation for corruption.