In a significant move highlighting China’s dedication to technological self-sufficiency, semiconductor start-up Changxin Xinqiao Memory Technologies, based in Hefei, successfully raised US$5.4 billion in its latest funding round. The funds were secured from government-backed investors, including the China Integrated Circuit Industry Investment Fund Phase II, underscoring Beijing’s commitment to achieving breakthroughs in the semiconductor industry and countering US sanctions.

Changxin Xinqiao, established in 2021, shares key shareholders and its general manager with Changxin Memory Technologies, China’s leading DRAM chip maker. The investment demonstrates Beijing’s resolve to bolster the nation’s semiconductor sector, aiming to compete with global industry giants such as Micron Technology and Samsung Electronics. Changxin Memory Technologies is gearing up for a significant move, planning to file for an initial public offering in China that could potentially value the company at over US$14.5 billion.

This strategic investment aligns with China’s broader focus on the semiconductor industry, which has gained momentum amid US efforts to restrict China’s access to cutting-edge chip technologies. Earlier successes were observed with companies like Huawei Technologies, which released a 5G phone featuring silicon produced by top Chinese chip maker Semiconductor Manufacturing International in August.

At the forefront of China’s semiconductor financing initiatives is the China Integrated Circuit Industry Investment Fund, commonly known as the Big Fund. Established in 2014, the Big Fund has attracted significant capital, totaling US$45 billion, and has supported numerous companies, including the US-blacklisted Yangtze Memory Technologies. Despite facing challenges due to a corruption probe, the Big Fund has ramped up its funding activities in 2023, making multiple investments, including the substantial backing provided to Changxin Xinqiao Memory Technologies.

This latest injection of funds underlines China’s steadfast commitment to achieving semiconductor excellence, fostering domestic innovation, and reducing reliance on foreign technologies in pursuit of technological independence.

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• Major US Chip Developer, Micron Technology is Looking to Partner with Chinese Chipmakers

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In a bid to bridge the technological gap with the United States, China is set to unveil a new state-backed investment fund, targeting a staggering $40 billion in funding for its semiconductor sector. This ambitious initiative is poised to become the largest among the trio of funds managed by the China Integrated Circuit Industry Investment Fund, colloquially known as the “Big Fund.”

In contrast to its predecessors in 2014 and 2019, which raised 138.7 billion yuan and 200 billion yuan, respectively, this new fund aims to amass a whopping 300 billion yuan (approximately $41 billion), as confirmed by government estimates.

Sources suggest that Chinese authorities have granted approval for the establishment of this new fund, with the Chinese finance ministry committing to provide 60 billion yuan. However, the identities of other contributors remain undisclosed, as the discussions were held confidentially.

Key areas of investment focus will encompass cutting-edge machinery for chip fabrication, emphasizing China’s determination to achieve self-sufficiency in semiconductor production. This goal has grown more critical in recent years, partly due to the US’s imposition of stringent export control measures, citing concerns that China might harness advanced chip technology to bolster its military capabilities.

In a move that could further intensify global competition, the United States unveiled comprehensive penalties last October, limiting China’s access to state-of-the-art chip manufacturing machinery. Likewise, U.S. allies such as Japan and the Netherlands have taken similar measures.

The fundraising process is anticipated to unfold over several months, with the timing of the third fund’s formation and potential alterations to the plan yet to be determined. The Big Fund’s initial two funds received support from the finance ministry and prominent state-owned enterprises like China Development Bank Capital, China National Tobacco Corporation, and China Telecom. 

Over the years, the Big Fund has financed various smaller companies and funds, including China’s two largest chip foundries, Semiconductor Manufacturing International Corporation, and Hua Hong Semiconductor, as well as flash memory manufacturer Yangtze Memory Technologies. Despite these investments, the Chinese chip sector has struggled to establish a dominant presence in the global supply chain, particularly concerning cutting-edge semiconductors.

To manage the capital of the new fund, the Big Fund is considering engaging at least two institutions, aiming to ensure effective and responsible allocation of resources. Notably, China’s anti-graft bureau has been investigating several senior officials and former officials at SINO-IC Capital, the sole manager of the Big Fund’s initial two funds, since 2021. Nevertheless, sources suggest that SINO-IC Capital is expected to continue playing a managerial role in the third fund.

Furthermore, Chinese authorities have reportedly reached out to China Aerospace Investment, the investment division of the state-owned China Aerospace Science and Technology Corporation, to explore the possibility of their involvement as fund managers.

As this substantial investment fund takes shape, China’s semiconductor industry is poised for a potential leap forward, aiming to compete on a global scale and reduce reliance on external chip technology.

Related:

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• Qualcomm Faces Stock Slide Amid AI Prospects and Semiconductor Earnings Report
• Foxconn pulls out from joint venture with Vedanta in India for a semiconductor factory

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