Shanghai Doubles Size Of Chip Investment Fund

A semiconductor investment fund operated by the city of Shanghai has doubled in size to about $2 billion (£1.54bn) after a new funding round, as China redoubles its efforts to develop domestic chip technologies amidst increasingly stringent US sanctions.

China says it is trying to achieve self-sufficiency in advanced chip technologies, while US authorities say China could use cutting-edge chips to threaten its national security.

The Shanghai Semiconductor Industry Investment Fund (SSIIF) raised some 6.9bn yuan ($970m, £740m) in its latest funding round from investors who are mostly state-backed companies based in the city, expanding its capital base to 14.5bn yuan, according to business registry database Qichacha.

Shanghai is a major chip manufacturing hub and is also the site of other high-tech manufacturing operations, including Tesla’s Gigafactory 3.

Chip investment

After the latest roud the SSIIF’s biggest investor remains Shanghai Science & Technology Venture Capital Group, with a 35 percent stake, followed by Shanghai Guosheng Group and Shanghai International Group with 18 percent each.

All three are state-controlled asset groups.

Over two phases beginning in 2016 and 2020 the fund has backed chip companies including Shanghai-based Semiconductor Manufacturing International Corporation (SMIC), China’s biggest chip manufacturer.

In July the Shanghia government formed the Integrated Circuit Industry Parent Fund with 45bn yuan set aside for investments into chip design, manufacturing, packaging, equipment and materials.

In May China launched its biggest-ever investment fund for the domestic chip industry, valued at 344 billion yuan.

Competition

The third phase of the China Integrated Circuit Industry Investment Fund, known as the “Big Fund”, was comparable in size to the roughly $53bn in incentives under the US’ Chips and Science Act, passed in 2022, which the US is using to build up its own domestic chip manufacturing.

The biggest investor into the Big Fund was China’s Ministry of Finance, with a 17 percent stake and paid-in capital of 60bn yuan, while the second-biggest was China Development Bank Capital with a 10.5 percent stake.

The fund included 17 other investors, among them five major Chinese banks.

As it squeezes the Chinese chip industry through export controls, the US has been announcing billions in subsidies through the Chips Act for domestic chip manufacturing by companies including Intel, Micron, Samsung and Texas Instruments.