Six banks to invest in big way in IC fund

$16b move part of nation's efforts to bolster self-reliance in sci-tech fields

Six major State-owned commercial lenders in China have decided to invest big time in the third-phase State semiconductor investment fund, as Chinese financial institutions ramp up efforts to bolster sci-tech innovations.

The move is seen as part of China's overall push to increase 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.

Their planned investments total 114 billion yuan ($15.73 billion), or nearly one-third of the fund, which was officially established on Friday with a registered capital of 344 billion yuan, according to the National Enterprise Credit Information Publicity System, a government-run credit information agency.

Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank plan to contribute 21.5 billion yuan each to the fund within 10 years from its establishment, which will give them a 6.25 percent share each.

Bank of Communications plans to invest 20 billion yuan while Postal Savings Bank of China is looking to invest 8 billion yuan. The six banks will make up 33.14 percent of the fund's total capital.

Zeng Shengjun, a senior researcher at the Shenzhen, Guangdong province-based Greater Bay Area Financial Research Institute of Bank of China, said the move indicates major State-owned lenders are expected to play a bigger role in fostering new quality productive forces.

"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 banks said that all the capital for this investment will come from their own financial resources. This investment represents a strategic deployment that is in line with the nation's key policies for the development of the integrated circuit industry, their own development strategies and available business resources, they said.

Zhang Xin, a former official from the Ministry of Industry and Information Technology, will serve as the fund's legal representative.

Industry sources said the third-generation semiconductors requiring materials like silicon carbide and gallium nitride are likely to be an investment focus for the third phase of the Big Fund.

In February 2023, Zhang, then working with the MIIT, visited Shunyi district in Beijing to guide the development of third-generation semiconductor technologies, the sources said.

Zhang Yi, CEO of iiMedia Research, said the third phase of the fund has diversified its investment areas. These areas not only include equity investments and asset management, but extend to venture capital fund management services.

"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 targets of the first two phases of the Big Fund focused on semiconductor equipment and materials, laying a solid foundation for the initial development of China's chip industry.

With the vigorous development of the digital economy and the artificial intelligence sector, AI chips and memory chips are becoming key parts in the industrial chain. The third phase of the Big Fund is likely to focus on high-value-added DRAM chips, in addition to continuing its support for semiconductor equipment and materials, China Fortune Securities said.

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

The first phase of the Big Fund was established in 2014 with a registered capital of 138.7 billion yuan and the second phase followed in 2019 with 204 billion yuan.