China’s ‘Big Fund’ raises RMB 200 billion to fuel chip industry

China’s semiconductor-focused fund, the China National Integrated Circuit Industry Investment Fund, has raised RMB 200 billion (around $29 billion) in its second financing round, the China Securities Journal reported on Friday, as the country aggressively promotes self-reliance in high-tech sectors amid the US-China trade war.

Why it matters: China’s efforts in growing its semiconductor manufacturing sector to increase technological self-reliance, of which the fund is a major feature, have grown in significance and urgency following the US ban on Chinese telecom equipment giant Huawei.

• The new funding round is a notable increase from the first round, which raised RMB 138.7 billion from the Ministry of Finance, the China Development Bank Capital, as well as several other state-backed enterprises in 2014.

Details: The second fundraising round follows the same investment strategy as the first round, but it focuses more on semiconductor end-uses, the report said.

• The Big Fund was set up to invest in chip manufacturing and designing, and promote mergers and acquisitions, according to a statement published in 2014 on the website of the Chinese Ministry of Industry and Information Technology (MIIT), which supervises the fund.
• The China Securities Journal report has not been confirmed by the China National Integrated Circuit Industry Investment Fund. An emailed inquiry TechNode sent to the firm on Friday was not immediately responded to.

Context: China’s State Council published the “National Integrated Circuit Industry Development Guidelines” in June 2014, which initially proposed to set up a special national industry investment fund to boost the semiconductor industry.

• The state-backed fund, also known as the “Big Fund,” was set up in 2014 by the Chinese government in a bid to catch up in the global semiconductor industry by backing semiconductor startups and related research and development.
• The guidelines also pledged to stimulate dynamism and creativity in China’s semiconductor companies and accelerate the pace of China’s semiconductor industry to catch up with international leaders.
• Annual semiconductor imports by China reached $312 billion in 2018, rising from $200 billion in 2013, according to the China Semiconductor Industry Association.