China has reportedly set up a fund with 344 billion yuan, or $47.5 billion, in capital to boost its domestic semiconductor sector.

Citing a regulatory filing, Reuters reported today that the fund was established last Friday. It’s the third and largest in a series of three state-backed investment vehicles created to support local semiconductor companies. The previous two funds were set up in 2014 and 2019, respectively, with 138.7 billion yuan and 204 billion yuan of registered capital.

China’s finance ministry is reportedly the largest shareholder in the third fund established last week with a 17% stake. The effort is also backed by more than a dozen other backers including five major Chinese banks, which are said to have stakes of about 6% each.

Reuters previously reported that the fund’s focus areas will include chipmaking equipment. EUV lithography machines from Netherlands-based ASML Holding NV, which use laser light to etch transistors into silicon, are not accessible to companies in China because of export restrictions. The same is true for certain types of less advanced chipmaking equipment. 

In February, the Financial Times reported that China’s largest semiconductor maker plans to produce five-nanometer processors using its existing stock of U.S.- and Dutch-made manufacturing equipment. Semiconductor Manufacturing International Corp., or SMIC, is expected to set up two five-nanometer production lines in Shanghai.

It’s believed the production lines will initially make chips for Huawei Technologies Co. Ltd smartphones. If the undertaking is successful, Huawei will also start manufacturing its most powerful artificial intelligence chips using SMIC’s five-nanometer process. The Financial Times sources’ added that SMIC has increased its seven-nanometer production capacity to boost the rate at which it can make smartphone chips and graphics cards.

Although advanced, five-nanometer technology is two generations behind the state of the art, Nvidia Corp.’s latest Blackwell B200 graphics processing units are based on a newer four-nanometer process. The GPUs are made by Taiwan Semiconductor Co. Ltd., which has been producing chips based on an even more advanced three-nanometer node since late 2022.

At the start of the year, ASML canceled a shipment of advanced lithography machines to customers in China following a request by the U.S. More recently, the U.S. Commerce Department revoked export licenses that allowed Intel Corp. and Qualcomm Inc. to sell some of their chips in China. The move came after Huawei introduced a new laptop, the MateBook X Pro, in April that was found to feature an Intel Corp. central processing unit.

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