China’s $50 billion chip fund shifts focus to counter US restrictions

China’s massive $50 billion chip investment fund, known as the Big Fund III, is changing its approach to tackle US technology restrictions. Instead of spreading money across many projects, the fund is now targeting key weaknesses in China’s semiconductor industry, like chip design software and lithography equipment, which are critical for making advanced chips.

These areas are heavily controlled by foreign companies, making them prime targets for US export bans. The fund plans to hold investments longer, focusing on long-term growth rather than quick returns. This shift comes as the US tightens controls on China’s access to cutting-edge tech, pushing Beijing to build its self-sufficient chip industry. The Big Fund III, launched recently with over 300 billion yuan ($41 billion), is backed by state-owned banks and local governments, showing China’s commitment to closing the tech gap.

This strategic pivot also involves deeper collaboration between Chinese tech firms, such as Huawei and SMIC, to create a strong domestic ecosystem. By focusing on these critical areas, China aims to reduce its reliance on foreign technology and strengthen its position in the global tech race, despite ongoing US efforts to limit its progress.