China’s state-backed funds injected more than $2 billion into domestic chip maker Semiconductor Manufacturing International Corp. (SMIC) as the country pushes for semiconductor independence from the US.
Why it matters: China has stepped up efforts to build a chip designing and making ecosystem inside the country with the help of massive state-based investment schemes and a financial market that allows more private capital to access.
- The move came as the Trump administration announced new rules Friday that will bar Chinese telecommunications equipment maker Huawei and its suppliers from using American technology and software.
Details: Shanghai-based SMIC said Friday that the China National Integrated Circuit Industry Investment Fund and the Shanghai Integrated Circuit Industry Investment Fund would invest $1.7 billion and $750 million respectively into one of its wafer plants.
- The plant’s registered capital would rise from $3.5 billion to $6.5 billion after the investment while SMIC’s stake in the plant would drop from 50.1% to 38.5%, the chip maker said.
- The national fund and the Shanghai-based fund will own 23.08% and 11.54%, respectively, of the semiconductor fabrication plant.
- The plant mainly produces 14-nanometer wafers.
Context: The Trump administration announced Friday a new rule that will block companies around the world from using American-made components and technology to design or produce chips for Huawei or its subsidiaries.
- China National Integrated Circuit Industry Investment Fund, also known as the “Big Fund,” raised RMB 200 billion (around $28.1 billion) in its second financing round in July.
- The state-backed fund was set up to invest in chip manufacturing and designing in 2014 and is backed by China’s Ministry of Finance, the China Development Bank Capital, as well as several other state-backed enterprises.
- Hong Kong-listed SMIC said earlier this month it is seeking to list on Shanghai’s Nasdaq-like STAR Market and raise around RMB 1.69 billion.
- Reuters reported last month that Huawei is shifting production of its in-house designed chips away from Taiwan Semiconductor Manufacturing Co Ltd (TSMC) to SMIC.
- TSMC, the world’s largest contract chip maker, has halted new orders from Huawei in response to Washington’s new rule change, Nikkei Asian Review reported Monday.