China’s second chip-focused ‘Big Fund’ raises $29 billion

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China has set up its second semiconductor-focused investment fund, raising RMB 204 billion (around $28.9 billion) from the finance ministry, state-owned firms, and local governments, the National Business Daily reported on Sunday.

Why it matters: The state capital-backed “Big Funds” will propel China toward its goal of building a world-class semiconductor industry amid urgent calls from Beijing to increase technological self-reliance.

  • The first Big Fund was set up to invest in chip manufacturing and designing, and promote mergers and acquisitions, according to a statement (in Chinese) published in 2014 on the website for China’s Ministry of Industry and Information Technology (MIIT), which supervises the fund.

Details: Twenty-seven organizations participated in the second financing round of the China National Integrated Circuit Industry Investment Fund, with China’s Ministry of Finance the largest shareholder after a RMB 22.5 billion investment, according to corporate intelligence information platform Tianyancha (in Chinese), which showed the fund was registered on Tuesday.

  • Other backers of the fund include China Development Bank Capital, state-owned firms such as China National Tobacco and the country’s three major telecom operators, local government-supported enterprises.
  • The only privately owned investor was San’an Optoelectronics, a Shanghai-listed chipmaker headquartered in the eastern coastal city of Xiamen. The company contributed RMB 100 million to the fund, accounting for only around 0.05% of the total funds raised.
  • The fund is chaired by Ding Wenwu, who is also the chairman of Yangtze Memory, a state-backed chipmaker which was reported last month to have started volume production of the country’s first homegrown 64-layer 3D NAND flash chips.

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

  • The guidelines pledged to stimulate dynamism and creativity in China’s semiconductor companies and accelerate the pace of China’s semiconductor industry in order to catch up with international leaders.
  • The first fund, which raised RMB 138.7 billion from the Ministry of Finance and China Development Bank Capital, as well as several other state-backed enterprises, was set up in 2014.
  • The first fund has so far invested in 23 semiconductor firms ranging from chipmakers to chip designers and semiconductor material makers, according to data from securities firm Changfeng Securities (in Chinese).