China does not stop pouring into semiconductor production: Beijing authorities have opened a $1.2 billion fund

The Beijing municipal government has launched a $1.2 billion fund to support the local semiconductor industry. This is just one of several similar initiatives by regional authorities in China.

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The new organization is called the Beijing Integrated Circuit Industry Investment Fund – its authorized capital is 8.5 billion yuan ($1.2 billion), according to information in the Qichacha corporate database. The fund was created by the Zhongguancun Development Group, established by the Beijing authorities in 2010, and will be managed by a subsidiary, Beijing Zhongguancun Capital Fund Managementa, specially created for these purposes.

The new fund in Beijing is the latest in a series of initiatives by regional Chinese authorities aimed at supporting the country’s semiconductor sector. The most prominent such organization in the country is the China Integrated Circuits Industry Investment Fund, or, as it is also called, the “Big Fund.” In May, Chinese authorities launched the third phase of the “Big Fund” with a registered capital of 344 billion yuan ($48.53 billion) – an amount comparable to the $53 billion that Washington allocated to support the American semiconductor industry in 2022.

In July, the 45 billion yuan ($6.35 billion) Mother Fund for the Integrated Circuit Industry was launched, followed by the Shanghai municipal government launching a similar fund of its own with a budget of almost $1 billion. As part of the government’s program to achieve self-sufficiency in semiconductors, Chinese government investment in the sector has increased sharply. State funding for the 25 largest Chinese chip manufacturers last year increased by 35% compared to 2022 and amounted to $20.53 billion.

Massive government subsidies contributed to the growth of China’s semiconductor industry, but also provoked the formation of excess capacity in production – while the country’s largest contractor SMIC is five years behind TSMC in technological terms, analysts from the American think tank ITIF calculated. TSMC produces 90% of the most advanced chips in the world.