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Technology autarky: China creates third national investment fund for integrated circuit industry "Phase III Co., Ltd."

Beijing is gradually striving to become more and more independent. In fact, the 14th Five-Year Economic Plan, 2021/2026, enshrines autarky in technology, high-end goods, and the overhaul of supply chains, which are to be more inward-oriented than outward-oriented. Unlike the previous two phases, this is the first time that six state companies are participating.



China initiated the third stage of its planned state-backed investment fund last week to boost its semiconductor industry. A filing with a government-run companies registry in Beijing revealed the funding to be worth CNY 344 billion ($47.5 billion). 


This photo taken on April 29, 2024 shows employees working at a semiconductor chips factory in Huai'an, in eastern China's Jiangsu province. Credit STR/AFP, Getty Images

The figure is part of the China Integrated Circuit Industry Investment Fund, also known as the "Big Fund." This move underscores President Xi Jinping's desire to achieve self-sufficiency in the strategic semiconductor industry.


In fact, the 14th Five-Year Economic Plan, 2021/2026, enshrines autarky in technology, high-end goods, and the overhaul of supply chains, which are to be more inward-oriented than outward-oriented

This strategic shift comes in the face of tariffs and sanctions imposed by economic rival, the United States, which fears that advanced Chinese chips could be used to bolster its military capabilities.


According to the National Enterprise Credit Information System, the limited liability company "National Integrated Circuit Industry Investment Fund Three Share" was registered on May 24. The legal representative is Zhang Xin and the registered capital is 344 billion yuan.


Industry and business information shows that National Integrated Circuit Industry Investment Fund III Co, Ltd. has as its business scope: general items: private equity fund management, venture capital fund management services; private equity funds engaged in equity investment, investment management, asset management and other activities; business management consulting.


Figure / National Enterprise Credit Information Publication System website

Industry and business information shows that the company is jointly owned by 19 shareholders.


Information provided by the Eyeball App shows that the top three shareholders are the Ministry of Finance, China Development Finance Corporation and Shanghai Guosheng (Group) Company Limited, with stakes of 17.4419 percent, 10.4651 percent and 8.7209 percent, respectively. Industrial and Commercial Bank of China, Agricultural Bank of China, Construction Bank of China and Bank of China hold 6.25 percent, Bank of Communications 5.814 percent and Postal Savings Bank 2.3256 percent. Yizhuang Guotou, which had participated in the first and second phases of the fund, holds 5.8 percent of the shares.


Source: Eye on the Sky

Previously, the National Investment Fund for the Integrated Circuit Industry was established in two phases on September 26, 2014 and October 22, 2019, respectively, with registered capital of 98.72 billion yuan and 204.15 billion yuan.


From the perspective of shareholder information, currently the Ministry of Finance, China Development Finance Limited Liability Company, China National Tobacco Corporation, Beijing Yizhuang International Investment Development Company Limited, Shanghai Guosheng (Group) Co. Ltd., Shanghai Guosheng (Group) Ltd. and for the first time six state-owned companies.


The Big Fund is playing a pivotal role in financing China's two biggest chip foundries, Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor. It's also extending support to Yangtze Memory Technologies, a flash memory manufacturer, and other smaller companies and funds. This significant investment is a clear indication of China's commitment to bolster its chip industry.


Bloomberg reported a positive market response to the Big Fund's investments. The shares of SMIC and Hua Hong rose to 5.4% and 6%, respectively, on Monday (May 27). This surge in share prices reflects the market's confidence in the future growth of China's semiconductor industry.


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