China’s Semiconductor Fund under Investigation
As the US passes the CHIPS Act, the former head of the country’s “Big Fund” which funded a number of China’[s major semiconductor companies, has been remanded to authorities and is under investigation. This follows a similar investigation of a former executive of Sino-lc Capital, the manager of the “Big Fund” on July 15. The big fund’s first investment round, which closed in 2018 was valued at RMB 138.7b ($20.57b US in today’s dollars) with 84% of funds going toward chip design and manufacturing, which included funding SMIC (688981.CH), YMTC (state), and UNISOC (state), and continues to sup[port China’s semiconductor industry today.
The Big Fund, aka The National Integrated Circuit Industry Investment Fund was created by the Chinese Ministry of Finance and China Development Bank Capital (state) in 2014, with major shareholders including China National Tobacco Corp (state), China Mobile (941.HK), and China Electronics Technology Group (state), also known as CEC, with both being on the US entities list due to connections to the Chinese military. The fund has over 74 direct holdings and over 2,700 indirect holdings, with over 200 being outside of China, and uses its resources to make investments that furthers the goals of the Chinese government. The funds from the first round were used by the end of 2018 and a 2nd round raising RMB 200b ($29.7b US) was completed in 2019.
In both investigations there was no mention of the reason for the inquiry, although mention of ‘serious violations of laws’ was referenced in statements made by the Central Commission for Discipline Inspection, and since the 2nd round there have been a number of visible and large failures in the Chinese semiconductor space, with HSMC (Wuhan Hongxin Semiconductor Manufacturing) being the most obvious. The company was valued at $18.5b as a start-up and was to build out a 14nm line followed by a 7nm line but closed last year before producing any silicon. The company ran out of money due to poor planning and was unable to raise capital after being accused of promoting technology it could not produce. Whether the investigations are related to the HSMC debacle or some other issue remains to be seen.
The Big Fund, aka The National Integrated Circuit Industry Investment Fund was created by the Chinese Ministry of Finance and China Development Bank Capital (state) in 2014, with major shareholders including China National Tobacco Corp (state), China Mobile (941.HK), and China Electronics Technology Group (state), also known as CEC, with both being on the US entities list due to connections to the Chinese military. The fund has over 74 direct holdings and over 2,700 indirect holdings, with over 200 being outside of China, and uses its resources to make investments that furthers the goals of the Chinese government. The funds from the first round were used by the end of 2018 and a 2nd round raising RMB 200b ($29.7b US) was completed in 2019.
In both investigations there was no mention of the reason for the inquiry, although mention of ‘serious violations of laws’ was referenced in statements made by the Central Commission for Discipline Inspection, and since the 2nd round there have been a number of visible and large failures in the Chinese semiconductor space, with HSMC (Wuhan Hongxin Semiconductor Manufacturing) being the most obvious. The company was valued at $18.5b as a start-up and was to build out a 14nm line followed by a 7nm line but closed last year before producing any silicon. The company ran out of money due to poor planning and was unable to raise capital after being accused of promoting technology it could not produce. Whether the investigations are related to the HSMC debacle or some other issue remains to be seen.
RSS Feed