China goes Big on Chips

What is China's Big Fund?

Ludo Lugnani
Ludo Lugnani

In Short: China just set up a whopping $47.5 billion fund to boost its semiconductor industry, aiming to outsmart US tech restrictions.

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What's Going On?

China rolled out its largest semiconductor fund yet, and it's a massive $47.5 billion deal. This isn't just some loose change under the couch cushions—this fund, called Big Fund III (give a medal to who came up with this name), is meant to turbocharge China’s homegrown chip industry. Why now? Well, the US has been tightening the screws, making it harder for China to get its hands on advanced chips and the fancy equipment needed to make them.

The Biden administration, following Trump's footsteps, has set up roadblocks, and even convinced buddies like the Netherlands and Japan to do the same. But China isn’t taking it lying down. Instead, they’re doubling down with Big Fund III, which is backed by big players like the central government and state-owned banks, including the Industrial & Commercial Bank of China.

Tthe headquarters of Semiconductor Manufacturing International in Shanghai, China
Shares in Chinese semiconductor companies, including SMIC, rose on Monday after the conclusion of the funding round Credit: Bloomberg

What Does This Mean?

So, what’s the big deal? For China, it’s a move to ensure they’re not left in the technological dust. This fund is all about speeding up the development of domestic semiconductor tech, which is crucial as the US keeps playing hardball. Think of it as China’s way of saying, “Fine, we’ll just make our own chips then!”

This injection of cash could give a big boost to Chinese chipmakers like SMIC and Hua Hong Semiconductor. Their stock prices have already jumped, showing that investors are pretty excited about what this fund could achieve.

On a global scale, this ramps up the tech rivalry between China and the US to new heights. The US has its own plans, like the CHIPS Act, pouring billions into its semiconductor industry. But China’s massive, state-backed investment strategy might just level the playing field—or even tip it in their favor.

Of course, this isn’t without its hiccups. China has had some bumps in the road before, like corruption issues and tech challenges. But if they can iron those out, Big Fund III could be a game-changer. In the high-stakes race for chip supremacy, both China and the US are gearing up for what looks like a high-tech showdown of epic proportions.

How does this impact Law Firms?

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