Big Fund

The Big Fund is a pot of money belonging to the Chinese state. Its official name translates as the “National Integrated Circuit Industry Investment Fund”. Integrated circuits are what people commonly call chips: tiny slices of silicon that do the actual computing work in phones, cars, and data centers. The fund collects money from the state and from state-affiliated companies and invests it in Chinese chip firms. It was founded in 2014, and since then there have been three major funding rounds totaling well over 60 billion euros. Because the official name is so cumbersome, practically everyone just calls it the “Big Fund”.

China’s answer to dependence on Western chip technology

China has been buying more chips than it can produce itself for decades. The most expensive and most advanced chips come from Taiwan, South Korea, and the United States. The machines used to manufacture chips also come almost entirely from the Netherlands, Japan, and America. Beijing regards this dependence as a strategic risk.

Since 2018, that risk has proven to be real. The United States imposed export restrictions on Chinese companies such as Huawei and SMIC. Certain machines and chips have since been barred from being shipped to China. The Big Fund is the financial answer to this: what you’re not allowed to buy, you should be able to build yourself.

This matters for the global economy because chips today are found in nearly every product. If China manages to manufacture advanced chips on its own, market shares and political leverage will shift. That’s why analysts watch every new funding round of the fund very closely. The third round in 2024 alone amounted to around 47 billion euros.

How the money is distributed

The Big Fund is neither a handout nor a classic subsidy. It works like an equity fund: it buys stakes in companies and thereby becomes a co-owner. The money comes from China’s Ministry of Finance, from state banks, and from state-owned corporations. It is managed by a dedicated company that makes the investment decisions.

The funds flow along the entire production chain. Some goes to fabs that manufacture chips, such as SMIC. Another portion goes to memory makers like YMTC or to companies that build production equipment. The third round placed greater emphasis on equipment and materials — precisely the areas where export bans hurt the most.

It hasn’t all gone smoothly. In 2021 and 2022, several senior managers of the fund were arrested on suspicion of corruption. Critics also point out that a lot of money flowed into projects that never produced a working factory. A well-known example is the company HSMC, which failed despite receiving billions.

The fund in economic news and the chip dispute

In the news, the Big Fund typically comes up in two contexts. First, when a new funding round is announced and newspapers compare the sums to the American CHIPS Act. Second, when a Chinese company reports a technical breakthrough, such as a new processor from Huawei.

This also matters for the share prices of European companies. The Dutch machine maker ASML earns a lot of money in China. Every report about Chinese advances or new export bans moves such stocks. Anyone reading business news will therefore regularly come across the term in stock market reports.

A common misconception is to think of the Big Fund as China’s only chip support program. In fact, there are also provincial funds, tax incentives, and research programs alongside it. The Big Fund is really the most visible element of a much larger package. Its figures make headlines so often only because they are officially published.