China sets up 204b yuan fund to invest in chip industry

Beijing

CHINA has formally created a 204 billion yuan (S$39.3 billion) state-backed fund to invest in the semiconductor industry and advance its goal of reducing dependency on US technology.

China is the world's biggest chip importer, and the long-awaited 204 billion yuan fund will fuel Beijing's efforts to forge its own semiconductor supply chain from chip design to manufacturing. It will play a key role in steering overall strategy and investment in the integrated circuit sector, which includes processors and storage chips used in smartphones and data centres.

Beijing's effort to reduce its reliance on American chips is taking on greater urgency as the Trump administration adds more Chinese names to its export blacklist, cutting off the flow of chips to targeted companies from Huawei Technologies Co to SenseTime Group Ltd.

The fund's registered capital comes mainly from state organisations, according to company registration information, which was posted online on Oct 22.

China's Ministry of Finance injected 22.5 billion yuan while an investment arm of China Development Bank poured in 22 billion yuan. It also attracted investment from local governments and state-owned enterprises including China Tobacco, the registration information shows.

China created its first state-led integrated circuit fund in 2014 to provide backing to major chip manufacturing initiatives, including Tsinghua Unigroup's multi-billion dollar memory chip plant in the central city of Wuhan.

Beijing is trying to reduce the country's reliance on semiconductor imports worth about US$200 billion annually. It fears such dependence undermines national security and hampers the development of a thriving technology sector. The country envisions spending hundreds of billions of dollars to achieve a prominent position in the semiconductor industry. BLOOMBERG