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China's $47.5B Chip Fund Targets AI Amid U.S. Export Curbs

A professor at NYU School, suggests that new fund, dubbed "Fund 3," is poised to revolutionize semiconductor landscape
May 30, 2024

China has launched a multibillion-dollar state-backed investment fund aimed at advancing its semiconductor industry, particularly in AI and supply chain development. This move underscores China's commitment to reducing its dependency on foreign technology amid increasing tensions with the U.S.

The newly established China Integrated Circuit Industry Investment Fund, known as the Big Fund, has amassed a staggering 344 billion yuan ($47.5 billion). According to Winston Ma, an adjunct professor at NYU School of Law, this third iteration of the fund will prioritize creating a comprehensive semiconductor supply chain and focus on advanced computing and memory chips crucial for AI development. Previous funds concentrated on equipment and materials.

Set against the backdrop of a global tech rivalry, this new fund is China's largest yet, surpassing the 138.7 billion yuan and 204 billion yuan raised by its predecessors in 2014 and 2019, respectively. The Big Fund's mission is part of China's broader strategy to fortify its domestic chip industry, especially as Western nations like the U.S. and the Netherlands impose restrictions on China's access to advanced technology.

"The capital from this fund is vital for the Chinese semiconductor sector, which faces significant challenges in global capital markets," said Ma. He highlighted the impact of recent U.S. measures, such as the Biden administration's executive order limiting foreign investment in China's critical tech sectors, including semiconductors. This geopolitical pressure makes the fund not just a strategic move but a necessary one for China.

In a notable development that challenges U.S. sanctions, TechInsights' analysis of Huawei’s Mate 60 Pro smartphone revealed an advanced chip produced by China's leading chipmaker, SMIC. The smartphone also features 5G capabilities, defying U.S. efforts to restrict Huawei's access to such technology.

China's strategic push with its new chip fund highlights its determination to lead in the semiconductor and AI industries. By investing heavily in developing a self-sufficient supply chain, China aims to secure its technological future and maintain its competitive edge on the global stage.

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