China creates $47 billion investment fund to develop semiconductor industry amid tariffs & sanctions – Firstpost
In recent years, the United States has blocked China from accessing critical technology needed to develop semiconductors read more
Amid an escalating trade war with the United States, China has floated a $47.5 billion investment fund to develop its domestic semiconductor industry.
In recent years, China has moved towards self-sufficiency in the domain of semiconductors as the United States has blocked China from accessing some of the Western critical technology needed to develop chips. The US has also sought to pursue allies the Netherlands and Japan to do the same.
The $47.5 billion fund floated this month is the third in the series of funds rolled out so far. The first was floated in 2014 and the second in 2019.
Global semiconductor production is highly conducted in Taiwan. Around 60% of all chips and approximately 90% of the most advanced chips are manufactured in Taiwan alone. The critical intellectual property (IP) and machinery involved in the making of the chips is primarily controlled by the United States and the Netherlands.
How is the US-China ‘chip war’ going on?
As the semiconductors have become central to several industries and world economy, the United States and China are competing fiercely in the domain.
The setting up of China’s fund, formally dubbed as National Integrated Circuit Industry Investment Fund-III and also called Big Fund-III, is being as Chinese President Xi Jinping’s push for his country to overcome West-imposed barriers and become a superpower in the domain of chips.
Over the past two years, the US has restricted the flow of critical chip-related technological know-how to China. The norms are such that US nationals working in Chinese semiconductor-related firms may need to make a choice between their jobs or citizenship.
Such forceful blows to Chinese semiconductor capacities have been delivered while trying to boost chipmaking in the US and Europe. Collectively, they have funneled nearly $81 billion toward the research and development of the next generation of chips, according to Bloomberg.
Following the Chips and Science Act of 2022, the Biden administration has offered $39 billion in grants for chipmakers and another $75 billions in loans and guarantees, as per the report.
China’s long ambition to win the chip war
The fund that China has set up now is the third of its kind. The first phase of the fund was set up in 2014 with $19.2 billion and the second phase was set up in 2019 with $28.2 billion, according to CNN.
In 2015, China also launched ‘Made in China 2025’ initiative that charted out a pathway for China to be a superpower in making biotech, electric vehicles, and semiconductors, as per the report.
The Biden administration has also imposed 100% tariffs on Chinese EVs and the European Union (EU) is also duelling with China on the issue of dumping of cheap Chinese EVs.
While China’s capacity to retaliate is limited in the domain of chips, it last year restricted export of two strategic raw minerals —gallium and germanium— critical to the global chipmaking industry.
Last year, China’s Huawei —under sanctions in the West— surprised the world by introducing a smartphone with a 7-nanometer processor that analysts thought could not have been built by a Chinese company considering the kind of restrictions in place.
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