China Counters US Tech Curbs With Massive $27B Fund To Boost Chip Industry

In a bold move to fortify its position in the global semiconductor arena, China has announced a massive $27 billion funding initiative aimed at propelling its chip industry forward. This development comes amid increasing technological tensions with the United States.

What Happened: In a strategic move to counteract U.S. technology restrictions, China is reportedly raising over $27 billion for its largest semiconductor fund yet. Bloomberg unveiled this development on Thursday, highlighting the escalating tech race.

The National Integrated Circuit Industry Investment Fund, also known as the Big Fund, is amassing this capital for its third installment. The fund is set to surpass the 200 billion yuan ($27.80 billion) of its predecessor, with contributions from local governments and state enterprises.

The Big Fund’s expansion comes as the U.S. intensifies its efforts to limit China’s advancements in chips and artificial intelligence. Directly managed by China’s tech ministry, the new fund marks a significant push to leverage the country’s semiconductor market, despite past challenges in central oversight.

Local governments, investment arms, and state-owned enterprises are expected to be the primary contributors to the fund. This aligns with President Xi Jinping‘s strategy to mobilize nationwide resources for major tech projects. The fund’s structure will include several sub-funds managed by general partners to diversify investments, while also directly supporting local firms.

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While negotiations are ongoing and could take months to finalize, the Big Fund remains a cornerstone of China’s quest for tech self-reliance. This renewed effort is in direct response to the U.S. pushing allies to tighten semiconductor technology restrictions on China.

Entities that receive backing from the Big Fund gain a formal endorsement from Beijing, which can lead to additional investor interest and policy support. Despite operating discreetly and facing scrutiny for its lack of transparency, the fund has been a key player in China’s semiconductor industry since its inception in 2014.

Why It Matters: The Big Fund’s third installment is a continuation of China’s aggressive push for technological independence, a goal that has faced significant headwinds. Previously reported challenges have included difficulties in meeting funding targets due to economic hardships and U.S. restrictions. Despite these obstacles, China’s commitment to the semiconductor sector remains unwavering.

Additionally, China’s strategy to bolster its AI sector through the provision of “computing vouchers” to startups reflects a broader initiative to mitigate the impact of U.S. chip restrictions. This move is designed to support AI companies in training and operating large language models, further emphasizing China’s proactive approach to sustaining its tech growth amid international pressures.

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