China Is Raising Up to $31.5 Billion to Fuel Chip Vision

[Bloomberg, LINK] China’s government aims to raise as much as 200 billion yuan ($31.5 billion) to invest in homegrown chip companies and accelerate its ambition of building a world-class semiconductor industry, people familiar with the matter said.

The state-backed China Integrated Circuit Industry Investment Fund Co. is in talks with government agencies and corporations to raise at least 150 billion yuan for its second fund vehicle but is angling for up to 200 billion yuan, the people said, asking not to be identified talking about a plan that hasn’t been publicized. It intends to begin deploying capital in the second half of the year, they added.

The firm will again invest in a wide range of sectors from processor design and manufacturing to chip testing and packaging, potentially benefiting industry leaders from telecoms gear makers Huawei Technologies Co. and ZTE Corp. to major players such as the Tsinghua Group. The first fund -- about 140 billion yuan -- had gone toward more than 20 listed companies, including ZTE and contract chipmaker Semiconductor Manufacturing International Corp., the people said.

Smaller chip players gained in the afternoon. Integrated circuit manufacturer Jiangsu Changjiang Electronics Technology Co. climbed as much as 6.2 percent in afternoon trading in Shanghai, while chip packager China Wafer Level CSP Co. gained almost 5 percent.

 

The figure above illustrates the projected top spenders in China from 2016 to 2020. SMIC will lead the pack in fab equipment investment with its new 300mm fab projects in Beijing, Shanghai, and Shenzhen as well as 200mm investment in Tianjin.  However, the number two to number five positions are all occupied by multinationals, especially from the memory segment. Samsung will continue its phase two investment in Xian; Intel is ramping up its 3D NAND capacity in Dalian; and SK Hynix is building a new DRAM fab in Wuxi. New memory players in China will only start to increase spending in the latter half of the forecast period. Aggressive investment is also planned by leading foundries in China including GLOBALFFOUNDRIES’ Chengdu fab, Hua Li Micro’s Fab 2 in Shanghai, UMC’s Xiamen fab, and TSMC’s Nanjing fab. Compared to a year ago, the investment levels and schedules of multinational companies’ in China have become more aggressive. [SEMI, LINK]