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Business Trends

China's semiconductor 'Big Fund' to focus on advanced chips

Chief seeks to prevent low-end products from causing supply glut

A researcher plants a semiconductor on an interface board at Tsinghua Unigroup's research center in Beijing.   © Reuters

SHANGHAI -- China will continue to invest in the development of high-end chips and will monitor the sector to ensure that only products of high quality are manufactured, said the head of the country's national semiconductor fund.

"We should definitely focus on developing high-end chips including core processing units, field-programmable gate-array [FPGA] chips and also memory chips," said Ding Wenwu, president of the China Integrated Circuit Industry Investment Fund, also known as the "Big Fund," in a speech at the SEMICON China fair on Thursday. FPGA is a kind of advanced programmable chip.

The fund is now in its second phase of capital-raising. In its first phase, it raised 138.7 billion yuan ($21.95 billion). Established in 2014 with support from the finance ministry and other Beijing-backed entities, it is China's most prominent investment vehicle. Its aim is to help build a competitive chip ecosystem for China so that the country can cut heavy reliance on foreign suppliers. The fund has also led local governments and private-sector entities in investments.

"We strongly urge local governments to invest rationally in semiconductor segments and we are specifically against the idea of them building similar and low-end chips," Ding said in response to a question about how his agency would ensure the quality of investments so as to avoid causing a supply glut.

Ding said the development of the semiconductor industry is a top priority for China, as outlined in the latest government work report by Premier Li Keqiang during the National People's Congress that is ongoing.

Ding Wenwu, president of the China IC Industry Investment Fund, said the development of the semiconductor industry is China's top priority.

China imported more than $260 billion of chip-related products in 2017, a much bigger amount than it spends on oil, according to Ding. Chips are the brains of electronic devices, and can be used for surveillance. Hence, their production and development have national security implications and form a strong incentive for China to work relentlessly to expand the sector.

China has two notable mobile core processor makers -- Huawei's Hisilicon Technologies and Tsinghua Unigroup's Unigroup Spreadtrum & RDA. But it does not own any substantial memory chip titans the likes of Samsung Electronics, SK Hynix and Toshiba; or FPGA chipmakers like U.S.-based Xilinx and Intel-controlled Altera.

Wang Zhanfu, chairman of the China Integrated Circuit Industry Investment Fund, said that China will need at least a national fund of 170 billion yuan to 210 billion yuan over the next five years, according to an article in Beijing-backed Posts & Telecommunications Press in December. Those numbers hint at the Big Fund's target for the second phase that it is currently raising. The whole semiconductor industry in China will require financing of up to 1.4 trillion yuan in the same period, said Wang in the article.

Over the past three years, the Big Fund invested in a wide range of companies including Semiconductor Manufacturing International, Jiangsu Changjiang Electronics Technology, Unigroup Spreadtrum & RDA, and Yangtze Memory Technology. The fund also financed Naura Microelectronics Equipment and Advanced Micro-fabrication Equipment -- both distant counterparts of western chip gear giants such as Applied Materials, Lam Research and ASML.

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