CHINA has pledged to invest an additional US$1.9 billion in the country’s biggest maker of memory chips, a deal that may herald a renewed influx of government capital into an industry hemmed in by US sanctions.

The National Integrated Circuit Industry Investment Fund will commit 12.9 billion yuan towards Yangtze Memory Technologies Co (YMTC), according to a government website that discloses company registration information. The capital infusion from the Big Fund, as Beijing’s signature investment vehicle is commonly known, was slated for completion on Jan 31, according to Tianyancha.

The scale of the investment suggests Beijing is again powering up spending on its beleaguered chip industry, which is struggling to circumvent US curbs on technology while grappling with slumping global demand. The Yangtze Memory deal marks the fund’s most significant industry investment in months.

Senior leaders – frustrated by the lack of progress in developing local chip alternatives – launched a sweeping corruption campaign in 2022 that took down senior officials and several executives linked to the Big Fund. The economy is now bouncing back, potentially relieving government finances strained by the years-long Covid Zero effort.

Hubei-based YMTC is one of only a handful of domestic chipmakers within striking range of the global leaders, competing with South Korean giants Samsung Electronics and SK Hynix to provide memory chips for applications from smartphones to data centre servers. Seen as a national champion, the firm was placed last year on Washington’s lengthening US trade blacklists.

A YMTC spokesperson didn’t immediately respond to a request for comment. Representatives for the Big Fund weren’t immediately available for comment.

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The secretive Big Fund is Beijing’s primary vehicle for doling out capital to the country’s chipmakers. Founded in 2014, it drew about US$45 billion in capital and backed scores of companies, including Semiconductor Manufacturing International Corp and YMTC. The fund operated mostly behind the scenes and kept investment standards away from public view, which some analysts said undercut accountability.

Then in 2022, officials began investigating its head as well as executives from vehicles linked to the Big Fund for alleged graft. Its activities slowed as the probe persisted.

But the need to galvanise China’s chip industry is growing more urgent as Washington slaps ever-tighter restrictions on the Asian nation. The US is increasingly limiting the kind of chip-making equipment that American companies can export to Chinese customers, while enlisting allied countries so that key suppliers like the Netherlands’ ASML Holding NV and Japan’s Nikon join its technology blockade.

Despite years of effort, China hasn’t made much progress in narrowing the gap with the West.

Chipmaking machinery is still dominated by ASML and firms such as Applied Materials and Tokyo Electron, despite the efforts of state institutions and firms like Naura Technology Group to design rival machines. Japanese firms control the supply of photoresists, a key chemical. Though tech giants such as Huawei Technologies drove intense research of local alternatives to US hardware, the country still relies on imports to meet most of its roughly US$150 billion in annual chip needs.

According to YMTC’s latest public registration information on the Tianyancha database, it has expanded the scope of its business to include “technology transformation” – opening the door for the firm to transfer technologies to other entities.

The new funds will buttress YMTC against the worst effects of the US sanctions, as well as an industry-wide downturn that’s hammered memory prices. BLOOMBERG