China’s Communist Party has launched a $47.5 billion state investment fund to strategically bolster its semiconductor industry in preparation for competition with the United States, Reuters reported on Monday.
The investment of 344 billion yuan is the largest among the three funds established, with the first fund established in 2014 and providing 138.7 billion yuan in capital, and the second fund established in 2019 and providing 204 billion yuan in capital. according to According to Reuters, China is subsidizing its semiconductor industry to compete with the United States in technology manufacturing, and semiconductor chips show great potential for both military and consumer use. (Related article: Biden’s environmental policies may be in jeopardy as China rapidly monopolizes key resources)
According to Reuters, China’s latest investment will be focused on expanding the country’s capacity for semiconductor manufacturing, an industry currently dominated by the U.S. The “Big Fund” has 17 Chinese companies listed as investors, with the top two being capital from the Chinese Ministry of Finance and the China Development Bank.
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The Biden administration also seeks to subsidize the U.S. semiconductor industry and its development through the $280 billion Chip and Science Act, signed into law in 2022, which allows funding for both research and manufacturing. The U.S. currently holds the intellectual property advantage in the chip industry, while China controls the vast resources needed for assembly.
The Commerce Department announced in April that it would provide about $6.6 billion in direct funding and $5 billion in loans to Taiwan Semiconductor Manufacturing Co. (TSMC). President Biden also visited chipmaker Intel’s Arizona campus in March, where he announced $8.5 billion in direct funding and $11 billion in loans for the company’s facilities in the state amid a stretched project timeline.
The United States has also put in place a number of restrictions to limit China’s access to U.S.-made chip technology, including imposing regulations in October 2022 that will blacklist several Chinese companies from doing business with U.S. companies. In October 2023, the Biden administration will tighten regulations to close loopholes in the current restrictions and further hinder the import of equipment that could help China manufacture more advanced semiconductor chips.
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