China Is All Set To Spend $40 Billion On Computer Chips to Counter US Trade Ban

The chip war is rising, and China and the U.S. compete against each other. China is reportedly preparing to introduce a new $40 billion investment funded by the government to subsidize its semiconductor industry. China competes with the U.S. and other tech giant countries to dominate high-end chip production. The $40 billion investment is the biggest of three launched by the China integrated circuit industry investment fund, also named the Big Fund. The fund will reportedly focus investment on machinery used to produce sophisticated chips, and its target is higher than comparable funds formed in 2014 and 2019.

Xi Jinping, the Chinese president, has pushed China to achieve self-sufficiency in semiconductors. The news circulating also indicates that the bipartisan CHIPS Act of the U.S. government granted $39 billion in industrial subsidies intended to increase local production of high-end chips. On the other hand, the U.S. and its allies have sought to limit China’s access to cutting-edge technologies out of concern that the Chinese government may use them to hasten its military modernization and intensify internal repression. 

In addition, the U.S., Japan, and the Netherlands have planned to implement export controls in recent years to prevent Chinese firms from acquiring the tools needed to produce the most advanced and high-tech semiconductors—similarly, those to power artificial intelligence models or guide precision weapon systems. 

However, the Chinese telecom company Huawei reportedly obtained $30 billion in government support in response to these trade restrictions to establish a semiconductor manufacturing network of businesses and operate under several names to circumvent export prohibitions. Moreover, the Chinese government has also retaliated by imposing its restrictions as those targeting U.S. chipmaker Micron. 

However, the export restrictions on China have caused some companies in the space, including A.I. powerhouse biggest giant Nvidia, to recreate their product portfolios to ensure that chips shipped to China comply with export restrictions. In a recent regulatory filing, Nvidia noted that the U.S. applied comparable restrictions on undisclosed Middle Eastern nations. Although several Middle Eastern nations have strong commercial boundings to rival nations like China and Russia, it needs to be clarified which nations in the region are affected by the limitations.

As per the reports, it still needs to be made clear when the Chinese government will launch the fund, and the fundraising process may take several months. The two most significant funds were financed by state-owned entities such as China Development Bank Capital, China National Tobacco Corp., China Telecom, and the government’s finance ministry.

Previously, significant funds were provided financial aid to China’s two largest chip makers, including SemiconductorSemiconductor Manufacturing International Corp. and Hua Hong SemiconductorSemiconductor, flash memory chipmaker Yangtze Memory Technologies, and several other smaller companies and funds. Instead of constantly investing in the sector and competing as a leading producer of less sophisticated chips, China has struggled to take a leading role in the global supply chain for advanced chips.

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