China Is Spending $47.5 Billion for Chip Industry

China is significantly bolstering its semiconductor industry with a historic investment of $47.5 billion, reflecting its strategic push to become a global leader in advanced technology. This substantial fund comes as part of China’s broader ambition to achieve technological self-reliance amid escalating tensions with the United States over chip exports.

The new investment, coordinated through the China Integrated Circuit Industry Investment Fund, marks the third and largest phase of the initiative, often referred to as the “Big Fund.” This latest phase aims to elevate China’s semiconductor capabilities, encompassing areas such as chip manufacturing, design, equipment, and materials.

China’s pursuit of semiconductor supremacy comes in the wake of stringent U.S. export controls. In October 2022, the Biden administration imposed comprehensive restrictions on the sale of advanced chips and chip-making equipment to Chinese firms without a special license. These measures aim to curb China’s technological advancements, compelling Beijing to find alternative paths to sustain its progress.

Despite these challenges, China has shown resilience and adaptability. Last year, Huawei launched a new smartphone featuring a 7-nanometer processor developed by China’s Semiconductor Manufacturing International Corporation (SMIC). This development surprised many analysts, who were skeptical about China’s ability to produce such advanced chips given the U.S. restrictions.

The “Big Fund” has previously experienced phases of growth, with the first phase established in 2014 amounting to $19.2 billion, and the second phase in 2019 accumulating $28.2 billion. The current phase, receiving investments from major state-owned banks like ICBC and China Construction Bank, represents a significant escalation in funding and ambition.

However, the fund has not been without its controversies. In recent years, it has been marred by corruption scandals, with top executives from state-owned chip companies, including Lu Jun, former CEO of Sino IC Capital, facing bribery charges. These issues have prompted anti-graft investigations, reflecting internal challenges that could hinder China’s tech aspirations.

Internationally, China’s moves have elicited responses from other tech-leading nations. For instance, the Netherlands, home to ASML — the only producer of extreme ultraviolet lithography machines crucial for advanced semiconductor manufacturing — has restricted the export of some of its machines to China, further complicating Beijing’s efforts.