Amidst the backdrop of the ongoing tech war between the United States and China, the latter is gearing up its semiconductor industry with a massive $27 billion chip fund, the largest of its kind to date.
This move comes as the US and its allies continue to escalate restrictions, aiming to thwart China’s advancements in chip technology. Let’s delve into the ups and downs of this technological arms race.
China’s semiconductor aspirations have recently taken center stage with the announcement of the “Big Fund,” managed by the National Integrated Circuit Industry Investment Fund. This substantial investment, drawing contributions from local governments and state enterprises, underscores China’s resolve to bolster its semiconductor capabilities despite external pressures.
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As reported by Bloomberg, key investors in the fund include the governments of Shanghai and other cities, China Chengtong Holdings Group, and State Development and Investment Corp. This coalition aims to accelerate cutting-edge technology development, countering the US campaign to stifle China’s technological expansion.
The Big Fund’s expansion marks a strategic maneuver by China’s tech ministry to assert dominance in the global semiconductor market. It aligns with President Xi Jinping’s vision of consolidating national resources for major technological endeavors, emphasizing self-reliance, and reducing dependence on foreign technologies.
Established in 2014, the Big Fund has played a pivotal role in supporting domestic chipmakers like Semiconductor Manufacturing International Corp (SMIC) and Yangtze Memory Technologies Co. Despite facing setbacks, including an anti-graft probe in 2022, the fund has regained momentum, symbolizing China’s unwavering commitment to achieving technological independence.
However, China’s push for self-sufficiency in semiconductor manufacturing faces challenges, particularly in reducing reliance on US-origin technology. Leading Chinese tech companies such as Huawei Technologies and SMIC still depend on US technology for certain advanced chip productions, indicating the complexities of achieving complete autonomy.
Huawei Technologies, a prominent player in the telecommunications industry and a global leader in 5G technology, has been significantly affected by the ongoing tech war. As the world raced towards implementing 5G networks, Huawei emerged as a frontrunner, offering advanced infrastructure and equipment. However, the company’s reliance on US-origin technology for certain critical components became a vulnerability amidst escalating tensions between the US and China.
The US government, citing national security concerns, imposed stringent restrictions on Huawei, effectively cutting off its access to key technologies, including semiconductors. These restrictions severely hampered Huawei’s ability to maintain its technological edge and continue its dominance in the 5G market.
The upsides of China’s semiconductor ambitions are evident in its efforts to diversify investment strategies through the Big Fund. By directly supporting local firms, China aims to enhance their global competitiveness and ensure the viability of its semiconductor industry.
Moreover, entities receiving capital from the fund enjoy formal endorsement from Beijing, granting them access to additional investment opportunities and policy support.
Despite these advancements, the tech war between the US and China has created a volatile environment for semiconductor innovation. Escalating US tech curbs targeting China’s chip and artificial intelligence sectors pose significant challenges to China’s semiconductor ambitions.
However, China’s determination to push forward with the Big Fund reflects its resilience in the face of adversity.