China’s $47B semiconductor fund puts chip sovereignty front and center

China boosts its chip industry with a $47B fund to ensure semiconductor sovereignty.

: China has established a $47 billion semiconductor fund, 'Big Fund III', aiming to enhance its chip manufacturing capabilities and reduce reliance on foreign technology. This move is part of a broader effort by global powers, including the U.S. and EU, to secure their own chip supplies amid growing geopolitical tensions. Big Fund III focuses on high-tech chip production, reflecting China's strategy to advance its technological self-sufficiency and counter foreign competition.

China has recently closed its third state-backed investment fund, referred to as the 'Big Fund III', amounting to 344 billion yuan (approximately $47.5 billion) to fortify its semiconductor industry. This initiative surpasses its predecessors in scale and aims to reduce China's dependence on foreign chip technology, which has become a critical issue amidst increasing geopolitical tensions and trade restrictions, especially from the U.S. The fund is set to improve China's capabilities in producing advanced wafers and seeks to bolster the production of High Bandwidth Memory chips used in various high-tech applications such as AI and IoT.

The establishment of Big Fund III coincides with a global push, as seen with the U.S. CHIPS Act and the EU Chips Act, to secure chip manufacturing capabilities within national borders due to security concerns and supply chain vulnerabilities. China's emphasis on semiconductor sovereignty not only reflects its strategic technological ambitions but also highlights the ongoing 'chip war' between China and Western nations. This geopolitical rivalry has pressed countries to accelerate their domestic chip manufacturing capacities to lessen strategic vulnerabilities.

Despite the sizable investment, challenges persist for China in catching up with the advanced manufacturing prowess of countries like the U.S. and Taiwan, with the latter housing TSMC, which produces about 90% of the world's most sophisticated chips. Moreover, past investments in China's semiconductor sector have not always yielded the desired outcomes, evidenced by issues of corruption and inefficiencies. However, China's aggressive funding strategies signify its commitment to overcoming these obstacles and achieving a competitive edge in the global semiconductor industry.