China Raises $47 Billion to Stoke the Global Semiconductor Arms Race

Never mind, we’ll do it ourselves. 

Over the weekend, Beijing announced a $47 billion fundraise for its so-called Big Fund that supports new companies and technologies in the country’s semiconductor industry. 

Timing Is Everything

The new infusion marks the third and largest-ever investment for the fund, which was christened about 10 years ago with Chinese President Xi Jinping’s ascension to office — and specifically his plan to rejuvenate China’s manufacturing industry. While some of that plan is the standard  “let’s get our manufacturing economy going again” strategy that any nation’s new leader might turn to, an extra impetus arrived in the form of an international technology trade war:

• As a stated nod to national security concerns, the Biden administration has been trying to slow China’s tech progress, preventing it from buying the most advanced chips from AI semiconductor king Nvidia as well as keeping the world’s most sophisticated chipmaking machines out of China’s hands.
• China’s DIY solution dovetails with what the West has been doing itself. As Bloomberg noted, the US and Europe have invested nearly $81 billion toward developing the newest chips. Biden’s 2022 Chips and Science Act included $39 billion in grants for US chipmakers alone.

Bank on it: Look closely and you may start to see some strain in China’s financing. The Financial Times reported that the country’s Big Fund struggled to raise capital this time around from local governments and state-owned businesses that are suffering from China’s economic malaise. So, for the first time ever the fund brought China’s six biggest state banks on board — they now have a one-third stake in the third fund. In the very immediate near term, the mood is upbeat: China’s top chipmaking stocks were all up big on Monday.