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Economic Forecast Asia China Country Analysis Manufacturing Technology Communication
what happened?
China reportedly raises more than $27 billion for the third phase of the National Integrated Circuit Industry Investment Fund. The state-owned investment vehicle, also known as the National IC Fund or “Big Fund,” is supported by China’s Ministry of Finance and state-owned enterprises, as well as central and local investment vehicles. This follows China’s new special bonds targeting “strategic” areas.
Why is it important?
Latest funding activity reflects China’s strengthening priorities for technological advancementEspecially amid reports that the United States wants to deepen ties with Germany and South Korea on export controls. These tactics mirror the United States’ successful efforts in 2023 to push Japan and the Netherlands to tighten export controls to China.
The EIU estimates that since 2014, Chinese government-led chip investment has likely exceeded US$150 billion. The Semiconductor Industry Association, a US-based industry group, also estimates that as of 2021, China has invested US$73 billion through direct financing in domestic semiconductor companies, and an additional US$50 billion through subsidies, equity investments, and low-interest loans. It is estimated that US dollars were invested. ““Phase 3” of the Big Fund will be added to this amount.
Each phase of the Big Fund has focused on a different segment of the semiconductor supply chain. The first phase directed resources toward semiconductor manufacturing and upstream chip design capabilities. The second phase, which began in 2019, targeted equipment such as etching machines and inspection and cleaning equipment, as well as materials such as photoresists and special gases. The third phase will reportedly invest primarily in chip manufacturing equipment, an area where China is struggling to break free from import dependence (especially advanced chips).
Although we continue to expect China’s chip manufacturing processes to remain several generations behind the world’s leading edge, China’s chip-related investments will allow the country to increase production capacity at mature nodes. . U.S.-led export controls would limit the scope of China’s advantages, but enforcement remains incomplete, as China’s IC advances in September 2023 attest. China will also seek to blunt U.S.-led trade restrictions by investing in emerging semiconductor technologies with less certainty. There are high expectations for the future of compound semiconductors and silicon photonics.
What’s next?
China’s state-led investment in the production of mature nodes will squeeze prices for “legacy” chips around the world, both through oversupply and cost advantages.This poses a downside price risk to markets that are heavily involved in the sector.; these include not only Chinese companies, but also companies from Malaysia, Vietnam, Taiwan, and South Korea. China’s strong lending push will also exacerbate international tensions over its state-supported economic model. Furthermore, even if China strengthens its mature chip production capacity, geopolitical concerns, including compliance with existing (and future) U.S.-led export controls, will hinder China’s efforts to increase its global market share. The attempt may fail.
The analysis and forecasts presented in this video are available on the EIU website. Country analysis service. This integrated solution provides unparalleled global insight covering the political and economic outlook of nearly 200 countries, enabling organizations to identify future opportunities and potential risks.
Economic Forecast Asia China Country Analysis Manufacturing Technology Communication
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