Highlights:

  • With a 17% interest, China’s finance ministry is purportedly the biggest shareholder in the third fund, launched last week.
  • The largest semiconductor manufacturer in China intends to use its current inventory of Dutch and American-made production equipment to develop five-nanometer CPUs.

Reportedly, China has set up a USD 47.5 billion (344 billion yuan) fund in capital to fuel its domestic semiconductor vertical.

The fund was founded recently, according to a report published citing a regulatory filing. Designed to help regional semiconductor companies, it is the largest of three investment entities funded by the state. The two prior funds, established in 2014 and 2019, had registered capital of 204 billion yuan and 138.7 billion yuan, respectively.

With a 17% interest, China’s finance ministry is purportedly the biggest shareholder in the third fund, launched last week. In addition, over a dozen other supporters of the initiative include five significant Chinese banks, each of which is said to hold a stake of over six percent.

According to a recent report, chipmaking equipment is one of the fund’s primary priority areas. Export controls prevent Chinese firms from using EUV lithography machines made by Netherlands-based ASML Holding NV, which etch transistors into silicon using laser light. The same applies to some less sophisticated chipmaking machinery.

The largest semiconductor manufacturer in China intends to use its current inventory of Dutch and American-made production equipment to develop five-nanometer CPUs. Semiconductor Manufacturing International Corp., or SMIC, is anticipated to establish two production lines in Shanghai.

The production lines are expected to start producing semiconductors for cellphones made by Huawei Technologies Co. Ltd. If the project is successful, Huawei plans to begin producing its most potent AI circuits with SMIC’s five-nanometer technology. According to the reported sources, SMIC has expanded its capacity to produce seven-nanometer circuits to accelerate the rate at which it can produce graphics cards and smartphone chips.

The latest graphics processing units from Nvidia Corp., the Blackwell B200, are based on a four-nanometer process, which is two generations ahead of the state-of-the-art while being an advanced five-nanometer technology. Taiwan Semiconductor Co. Ltd. manufactures the GPUs, which has been manufacturing chips based on an even more sophisticated three-nanometer node since late 2022.

In response to a request from the United States, ASML halted the shipment of sophisticated lithography machines to clients in China at the beginning of the year. Recently, the U.S. Commerce Department revoked export permits that permitted Intel Corp. and Qualcomm Inc. to sell certain of their chips in China. The action was taken in response to Huawei’s April introduction of the MateBook X Pro, a new laptop that was discovered to use an Intel Corp. CPU.