The China New Fund is a large-scale investment fund led by the Chinese government to support the development of the domestic semiconductor industry. The fund was established against the background of the U.S.-China technology war and aims to enhance China's self-sufficiency in the semiconductor field.

What is the third phase of China’s new fund?

The "National IC Industry Development and Promotion Outline" released and implemented in June 2014 proposed the establishment of a national industrial investment fund. The National Industrial Investment Fund mainly attracts large enterprises, financial institutions and social funds, adopts market-oriented operations, focuses on supporting the development of industries such as integrated circuits, and promotes industrial transformation and upgrading.

China New Fund Phase III is the National Integrated Circuit Industry Investment Fund Phase III, referred to as "New Fund Phase III", which is the third national industrial investment fund established by China to promote the development of the semiconductor industry.

Appropriation budget for the third phase of the new fund

China New Fund Phase III, the third phase of the National Integrated Circuit Industry Investment Fund, will be officially established in May 2024. The registered capital of the fund reached 344 billion yuan (approximately NT$1.5 trillion), which is far larger than the previous two phases. This fund is jointly held by 19 shareholders including the Ministry of Finance of the Mainland, China Development Bank Financial Corporation, Shanghai Guosheng (Group) Co., Ltd., Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China.

How to implement the third phase of the new fund

The operation of the third phase of the new fund will continue the market-oriented principle and mainly include three stages: investment period, payback period and extension period. Its operation cycle is as long as 15 years, reflecting the perspective of long-term strategic investment. Fund management mainly involves activities such as private equity investment fund management, venture capital fund management services, equity investment, investment management and asset management.

New Fund Phase III Industry

The third phase of the new fund will focus on investing in various key links in the semiconductor industry chain, including chip design, manufacturing, packaging and testing, and the research and development of related equipment and materials. In addition, the fund will also focus on key areas of artificial intelligence semiconductors, such as the high-bandwidth memory (HBM) industry.

The purpose to be achieved by the third phase of the new fund

The main purpose of the third phase of the new fund is to promote the independent development of China's semiconductor industry and reduce dependence on external technology and equipment. By guiding social capital to increase multi-channel financing support for the integrated circuit industry, the fund aims to break through the "stuck" links in the semiconductor industry chain and enhance China's competitiveness in the global semiconductor field.

The difference between the third phase of the new fund and the first two phases

Increase in size:

The first phase of the fund was established in 2014, with a scale of approximately RMB 130 billion.

The second phase of the fund was established in 2019, with a scale of approximately RMB 200 billion.

The size of the third-phase fund reached 344 billion yuan.

Investment focus:

The first phase of the fund mainly invests in integrated circuit manufacturing (67%), design (17%), packaging and testing (10%), and equipment materials (6%).

While continuing to support the semiconductor industry, the second phase of the fund will pay more attention to the upstream and downstream of the industrial chain, including design, manufacturing, packaging and testing, and the research and development of related equipment and materials.

The third phase of the fund further expanded into key technology fields of artificial intelligence semiconductors, such as the HBM industry.

Operation cycle:

Compared with the first two funds, the operation cycle of the third fund is longer, reaching 15 years, which reflects the importance that fund managers attach to long-term strategic investment.

brief analysis

The establishment of the third phase of China's new fund marks a major step forward for China in promoting the independent development of the semiconductor industry. Through larger-scale capital investment and longer-term strategic planning, the fund aims to accelerate the breakthrough of technological bottlenecks, enhance China's competitiveness in the global semiconductor market, and get rid of dependence on American technology amid the U.S.-China technology war.