China Pumps Further $47.5 Billion Into Its Chip Industry

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Chinese employees operate machinery at a semi conductor in Siyang County, Suqian City, Jiangsu Province. March 1, 2023. (Getty Images)

China has announced a $47.5 billion investment to boost its domestic chip industry in a new state-backed initiative aimed at propelling the development and production of advanced semiconductor technologies within China. The ambitious cash injection falls under China’s broader efforts to subvert US dominance in advanced chip manufacturing and fortify their position in the global semiconductor market, which are pivotal for everything from consumer electronics to national defense systems.

The $47.5 billion fund, which has been dubbed ‘Big Fund III’, will likely focus investment on the research and development of cutting-edge semiconductor technologies, particularly those needed for high-performance chips that have both military and high-end consumer applications. In addition, the fund is expected to support the expansion of China’s domestic chip manufacturing capabilities to reduce its dependency on foreign technologies amid increasingly harsh tariffs, embargoes and trade sanctions.

In fact, the driving force behind this colossal investment is stringent trade sanctions imposed by the US, a leading semiconductor manufacturer. These sanctions have primarily targeted chip-producing Chinese firms like SMIC, cutting off their access to critical technologies needed to produce advanced chips. The US implemented them in a bid to curb China’s technological and military advancements, effectively forcing them to bolster their domestic chip manufacturing industry to counteract their dependency on foreign chips.

China’s move to strengthen and accelerate the growth of its semiconductor industry also reflects a broader global trend where nations are recognizing the strategic importance of chip production, and their position as the backbone of AI technologies. Similar initiatives have been seen with the European Union’s Chips Act which mobilized 43 billion Euros to enhance semiconductor production in Europe, as well as the US’s CHIPS for America Act.

Written by Rakan Pharoan

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