Benzinga - by Shanthi Rexaline, Benzinga Editor.
While Nvidia Corp. (NASDAQ:NVDA) and Advanced Micro Devices, Inc. (NASDAQ:AMD) may be among those U.S. chipmakers losing sleep over contraction in China revenue, a new report said on Monday that China could be looking to beef up its domestic semiconductor industry.
What Happened: China set up its largest-ever semiconductor investment fund with Big Fund III, having collected 344 billion yuan (about $48 billion), a Bloomberg report said. The financing came from the Chinese central government and various state-owned banks and enterprises, the report said citing Tianyancha, an online platform that aggregates official company registration information.
The fund was reportedly incorporated on May 24 in a bid to sidestep the U.S. government’s China chip ban and nurture its own semiconductor industry. The U.S. has also been influencing its allies, including the Netherlands, Germany, South Korea and Japan, to tow in line with its restrictive policy toward China.
China's Ministry of Finance is the largest shareholder in the fund, with investment firms owned by local governments in Shenzhen and Beijing also making sizeable contributions, the report said. The Shenzhen government has already been supporting chipmakers in the Guangdong province to supply semiconductor components to Huawei, which has been stymied by the U.S. ban, it added.
The national chip fund was set up a decade ago with 100 billion yuan in investible capital and the size of the fund was more than doubled with the Big Fund II in 2019 amid the standoff between the U.S. and China when Donald Trump was president.
China has long pursued indigenization of industrial production and rolled out a program named “Made in China 2025,” in 2015 that envisages development in domestic biotech, electric vehicles and semiconductor industries.
Nvidia, AMD At Disadvantage? The Huawei 5G-enabled smartphone unveiled in August 2023 had a processor made by China’s SMIC, Bloomberg said, citing teardown of the phone by TechInsights. This has cast doubts regarding the viability of the U.S. plan to curb China’s prowess by restricting imports to the country by Nvidia, which manufactures high-performance AI accelerators used to train AI models, and chip equipment made by ASML Holdings NV (NASDAQ:ASML) and Applied Materials, Inc. (NASDAQ:AMAT).
The report said the U.S. ban forced China to increase investments in less-advanced chipmaking capabilities, with these chips referred to as legacy chips. China is now looking to build a network of chip companies around Huawei for technological breakthroughs in advanced chip development and manufacturing, it added.
“The newly created Big Fund III may provide funding for those projects,” the report said.
A Reuters report said last week that H20, the most-advanced AI chip Nvidia produced exclusively for China to sidestep the U.S. ban, got off to a weak start due to a supply glut. The U.S. company’s chips were priced at a discount of about 10% to Huawei’s Ascend 910B in some markets, it said.
The iShares MSCI China ETF (NYSE:MCHI) ended Friday’s session down 0.18% to $44.97 and the iShares Semiconductor ETF (NASDAQ:SOXX) jumped 1.98% to $238.56, according to Benzinga Pro data.
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