China commits record $47 billion for domestic semiconductor push with Big Fund III

China recently kicked off the third phase of its Integrated Circuit Industry Investment Fund—often called “Big Fund III”—pouring in a whopping CN¥344 billion (roughly $47 billion) to bolster its homegrown semiconductor sector. Officially operational since December 31, 2024, the fund has set aside an initial CN¥93 billion ($12.685 billion) for businesses focused on chipmaking materials and manufacturing equipment.

Run by Huaxin Investment Management, this latest installment marks Beijing’s biggest push yet for semiconductor self-reliance, outstripping the total raised by the first two rounds combined. Back in 2014, the initial phase collected CN¥138.7 billion ($18.9 billion), followed by CN¥204.1 billion ($27.8 billion) in 2019.

China’s decision to inject these funds stems from tightening U.S. export controls that limit access to advanced chip technology. Previous rounds of investment have already scored some wins—like SMIC rolling out 7nm chips for Huawei’s Mate 60 phones and YMTC producing memory chips for the Pura 70 lineup.

However, the program hasn’t been without its setbacks. In 2022, corruption probes targeted several fund managers and government officials. Plus, the Wuhan Hongxin Semiconductor Manufacturing project flopped despite hefty state funding and officially shut its doors in June 2021 without delivering a single commercial chip.

To put this into perspective, although $12.685 billion is no small chunk of change, it’s not quite enough to outpace the annual R&D budgets of leading chip equipment makers such as ASML ($4.308 billion in 2023) and Applied Materials ($3.233 billion in 2024). Overall, the fund’s total size sits right around the $53 billion price tag of the U.S. CHIPS Act.

According to Trivium China’s senior analyst Linghao Bao, American export restrictions could spur even faster innovation in China as domestic companies hunt for homegrown chip tech to replace foreign solutions. Case in point: Alibaba is reportedly eyeing Huawei as a go-to source for AI chips now that Nvidia faces sales constraints in the Chinese market.