China is taking a major step forward in its efforts to counter U.S. technology restrictions by raising over $27 billion for its largest chip fund yet. 

Bloomberg reports that the National Integrated Circuit Industry Investment Fund, also known as the Big Fund, is spearheading this initiative. For its third vehicle, the fund is gathering funds from local governments and state enterprises. The goal is to surpass the 200 billion yuan raised by its second fund.

This move is crucial as the U.S. intensifies its efforts to limit China's access to advanced semiconductor technology. Amidst this backdrop, China is striving for self-sufficiency in chip production, especially given the recent tightening of restrictions by the U.S. and its allies.

China's Big Fund for Chips

The Big Fund, established in 2014, vitally supports local chipmakers. With approximately $45 billion in capital, it has backed numerous companies, including Semiconductor Manufacturing International Corp. (SMIC) and Yangtze Memory Technologies Co.

Huawei Technologies Co. and Semiconductor Manufacturing International Corp. had to rely on US technology to produce an advanced 7-nanometer chip for Huawei last year, highlighting China's challenges in achieving complete technological independence.

The third phase of the Big Fund is expected to receive the majority of its capital from local governments and state-owned enterprises. This emphasis on local investment reflects China's determination to pool domestic resources for major technological projects.

Shanghai-based SMIC, a key player in China's chip manufacturing sector, successfully developed a 7-nanometer processor for Huawei in 2023 - putting the smartphone maker at the top of the Chinese market.

Despite these advancements, China remains dependent on foreign technology for certain critical components.

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US Heightens Tech Curbs

In response to China's efforts, the US government is pressuring allies such as the Netherlands, Germany, South Korea, and Japan further to tighten restrictions on China's access to semiconductor technology. This includes limiting exports of specialized chemicals and halting service and repair of chipmaking equipment for Chinese clients.

This push underscores the broader geopolitical implications of the semiconductor industry and its role in shaping global technological competition.

The US is particularly concerned about China's military ambitions and ability to leverage advanced chips for military purposes.

China's move to establish its largest chip fund underscores its determination to achieve technological autonomy in the face of escalating tensions with the US and its allies. 

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