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AsianFin--China has set up its third planned state-backed investment fund to boost its semiconductor industry, with a registered capital of 344 billion yuan ($47.5 billion), according to a filing with a government-run companies registry.

The fund is launched amidst extensive U.S. restrictions on the export of chips and related technologies, in a bid to curb Beijing's technological advancements.

According to Tianyancha, a Chinese corporate information database, the Ministry of Finance is the principal shareholder, holding a 17% stake with a contribution of 60 billion yuan. The China Development Bank Capital follows with a 10.5% stake.

The fund has 17 additional investors, including five major Chinese banks: Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, and Bank of Communications, each contributing approximately 6% of the total capital.

The major banks said that this investment is an important strategic move made in line with the country's significant decisions on the development of the integrated circuit industry, the banks' own development strategies, and their business resources.

This investment is a strategic choice for the banks to serve the real economy and promote sustainable economic and social development. It is also a major initiative for the banks to fulfill their responsibilities as major financial institutions and has significant importance for advancing their financial business development.

Under the "Made in China 2025" plan, Beijing aims for China to become a global leader in various high-tech industries, such as artificial intelligence, 5G wireless, and quantum computing.

This new fund marks the third phase of the China Integrated Circuit Industry Investment Fund, known as the “Big Fund”, which was officially launched in Beijing on Friday, as per the National Enterprise Credit Information Publicity System.

Following the announcement, shares of leading Chinese chipmakers surged. Semiconductor Manufacturing International Corporation (SMIC), the world's third-largest contract chipmaker, saw a 7% increase since Monday. Hua Hong Semiconductor, China's second-largest chip foundry and a Huawei supplier, rose by 13%.

The fund's first phase was initiated in 2014 with 138.7 billion yuan ($19.2 billion), followed by the second phase five years later with 204.1 billion yuan ($28.2 billion) in 2019.

Since its commencement, the fund have collectively raised hundreds of billions of dollars and invested in numerous microelectronics companies. Meanwhile, according to a Bloomberg report, the assets managed by the fund are currently valued at around $45 billion.

This valuation may be influenced by U.S. sanctions against China's semiconductor sector, which have significantly impacted major companies such as SMIC and Yangtze Memory Technologies Co. (YMTC), China's leading 3D NAND manufacturer.

The primary goal of these investments is to elevate China's semiconductor industry to global standards by 2030, focusing on chip manufacturing, design, equipment, and materials, as said by the Ministry of Industry and Information Technology at the launch of the first phase in 2014.

In October 2022, the U.S. introduced export controls preventing Chinese companies from purchasing advanced chips and chip-making equipment without a license. The Biden administration has also urged allies like the Netherlands and Japan to impose similar restrictions.

In order to remain competitive, China has invested heavily in its domestic semiconductor market however, the country has also managed to purchase prohibited GPUs for use by its military institutions, state-run AI research centers, and universities.

In September 2023, the U..S government opened an investigation after it was first discovered the Huawei Mate Pro 60 contained 7nm, 5G-enabled chips produced in China by the partly state-owned SMIC.

Under its sanction regime, the U.S. has sought to restrict the availability of 7nm chips in China by imposing export restrictions, and SMIC was barred by the US from obtaining the machines necessary for the production of 7nm chips in late 2020.

When the Department of Commerce started its investigation, at that time, the most advanced chip SMIC had been known to manufacture was a larger-scale 14nm semiconductor.

The establishment of this new chip fund is a strategic move to counter Western sanctions and aligns with the country’s vision to become a global technology leader.

According to Huaxin Securities, the first two phases of the fund focused on equipment and materials, laying a solid foundation for China's initial chip industry development. With the rise of the digital economy and artificial intelligence, computing and memory chips will become critical nodes in the industrial chain. The third phase of the fund is likely to focus on high-value chips such as High Bandwidth Memory (HBM) and Dynamic Random Access Memory (DRAM).