Six Major Banks Announce Significant Investment in IC Fund

Six of China’s largest state-owned financial institutions have decided to invest heavily in the third phase of the state-owned semiconductor investment fund, as China’s financial institutions step up efforts to promote science and technology innovation.

The move is seen as part of China’s overall efforts to increase its self-reliance in science and technology.

On Monday, the six banks announced their intention to invest in the third phase of the China Integrated Circuit Industry Investment Fund, also known as the Big Fund.

The company’s investment plans totaled 114 billion yuan ($15.73 billion) as of Friday, with registered capital of 344 billion yuan, according to the National Enterprise Credit Information Publicity System, a government credit reporting agency. It was officially established.

Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank will each contribute 21.5 billion yuan to the fund within 10 years of its establishment, representing a 6.25% stake.

Bank of Communications will invest 20 billion yuan and Postal Savings Bank of China will invest 8 billion yuan. The six banks will account for 33.14% of the fund’s total capital.

Zeng Shengjun, a senior researcher at the Shenzhen-based Bank of China Greater Bay Area Financial Research Institute, said the move suggests that large state-owned financial institutions are expected to play a bigger role in promoting new high-quality loans. Productive forces will be unleashed.

“The banks will likely intensify financial support while offering a range of financing services such as technology innovation loans and industrial chain finance to support specific projects,” Zeng said.

“They can also leverage on their expertise in risk assessment for high-tech industries, to assist the fund better, preventing and managing project risks. In addition, they can help attract high-quality investment and introduce advanced technologies from overseas.”

The bank said the investment will be fully funded from its own resources. The investment represents a strategic deployment in line with the country’s key policies on the development of the integrated circuit industry, its own development strategy and available business resources, they said.

Zhang Xin, a former Ministry of Industry and Information Technology official, will be the fund’s legal representative.

Third-generation semiconductors, which require materials such as silicon carbide and gallium nitride, are likely to be the focus of the big fund’s investment in the third phase, industry sources said.

In February 2023, Zhang, who was then working at MIIT, visited Beijing’s Shunyi District to lead the development of third-generation semiconductor technology, the people said.

Zhang Yi, CEO of iiMedia Research, said the fund’s third phase saw it diversify its investment areas. These areas went beyond equity investment and asset management to also include venture capital fund management.

“This change means that the Big Fund will invest across a broader scope, significantly enhancing the flexibility and diversity of its investment strategies,” Zhang said.

China Fortune Securities said in a research report that the main investment target of the first two phases of the Big Fund will focus on semiconductor equipment and materials, laying a solid foundation for the early development of China’s chip industry.

With the rapid development of the digital economy and artificial intelligence fields, AI chips and memory chips are becoming an important part of the industrial chain. According to China Fortune Securities, the third phase of the Big Fund is likely to focus on high value-added DRAM chips in addition to continued support for semiconductor equipment and materials.

DRAM chips refer to dynamic random access memory chips, or flash memory semiconductors, which are widely used in smartphones, PCs and servers.

The first phase of Grand Fund was established in 2014 with registered capital of RMB 138.7 billion, followed by the second phase in 2019 with registered capital of RMB 204 billion.