China sets up a large fund of more than 300 billion yuan to support semiconductors

In order to support the development of the semiconductor industry, China's National Integrated Circuit Industry Investment Fund (referred to as the Big Fund) Phase III joint-stock company was established with a registered capital of 344 billion yuan (RMB).

Comprehensive Reuters and Securities Times and other reports, the APP shows that the National Integrated Circuit Industry Investment Fund III Co., Ltd. was established last Friday (May 24), and registered in the Beijing Market Regulation and Administration, the legal representative is Zhang Xin, registered capital of 344 billion yuan.

The third phase will be the largest of the three funds launched by China Integrated Circuit Industry Investment Fund, and its business scope is private equity investment fund management, venture capital fund management services, and private funds are engaged in equity investment, investment management, asset management and other activities.

Shareholder information shows that the company is jointly held by 19 shareholders including the Ministry of Finance, CDB Capital Co., LTD., Shanghai Guosheng (Group) Co., LTD., Industrial and Commercial Bank of China Co., LTD., China Construction Bank Co., LTD., Agricultural Bank of China Co., LTD., and Bank of China Co., LTD.

China's Ministry of Finance is the largest shareholder with a 17 percent stake, while China Development Bank Capital is the second largest shareholder with a 10.5 percent stake. The other big five state-owned banks contributed about 6%.

Established in 2014, the China Grand Fund aims to leverage social capital through financial funds, focusing on investing in key links in the semiconductor industry chain, including chip design, manufacturing, packaging and testing.

The registered capital of the first phase of the large fund reached 138.7 billion yuan, and the investment distribution was roughly 67% for integrated circuit manufacturing, 17% for design, 10% for sealing and testing, and 6% for equipment and materials. The second phase of the fund was established in 2019 with a registered capital of 204 billion yuan, and while continuing to support the semiconductor industry, it pays more attention to the upstream and downstream of the industrial chain, including design, manufacturing, packaging and testing, as well as the research and development of related equipment and materials.

Huaxin Securities believes that in addition to continuing its support for semiconductor equipment and materials, the third phase of the large fund is more likely to list high value-added dynamic random access memory (DRAM) chips such as high bandwidth memory (HBM) as key investment objects.

Big funds have provided financing to SMIC and Huahong Semiconductor, two of China's largest chip foundries, as well as flash memory maker Changjiang Memory Technology and smaller companies and funds.

Reuters reported in September last year that one of the major investment areas of the fund's third phase is chip manufacturing equipment. In addition, large funds are also considering hiring at least two investment institutions to invest from the third stage.

Over the past few years, the United States has imposed a series of export controls on China, citing concerns that Beijing could use advanced chips to bolster its military capabilities. Chinese authorities are accelerating domestic research and development in advanced semiconductors to offset the impact of US sanctions.