China's Big Fund reduces stakes in some semiconductor firms as it adjusts investment focus

Annie Huang, Taipei; Rodney Chan, DIGITIMES Asia 0


The National Semiconductor Industry Investment Fund of China (commonly known as the Big Fund) has cut its shareholdings in some semiconductor firms, as it is adjusting its investment direction.

The Big Fund, set up to advance China's semiconductor industry, raised CNY138.7 billion in Phase One project. Its Phase Two project was launched in 2019, and raised CNY204.15 billion, eyeing investments mainly in IC design, packaging, testing, equipment and materials sectors.

Since mid-March, several Chinese semiconductor firms have disclosed the Big Fund will slash its holdings in the companies. Chang Chuan Tech, an equipment maker on the portfolio of the Big Fund, indicated that the Big Fund is going to cut its stake in the equipment maker by 2% due to its own management needs.

It is not the first time that the Big Fund has cut its holdings in Chang Chuan. In 2021, the Big Fund cut its investments in Chang Chuan for a total of three times, reducing its holdings from 9.87% to eventually 6.67%. In 2022, the Big Fund further reduced its holdings and it currently has 6.71% of Chang Chuan's shares.

Chang Chuan chiefly makes testing systems, probers and sorting machines. Its clients include Chinese backend service suppliers (such as JCET, Huatian Technology and Tongfu Microelectronics) and Chinese IDMs, (such as CR Micro and Silan).

Wanye Enterprise, a Chinese equipment and materials supplier, also disclosed its third largest shareholder, the Big Fund, will reduce its holding by about 1%. The Big Fund currently holds a 5.22% stake in Wanye.

But Wanye at the same time disclosed that the Big Fund's Phase Two project had invested CNY350 million in its subsidiary, a semiconductor components makers, in 2022.

IC design house Goke Microelectronics revealed that the Big Fund is going to reduce its stake in the company by 2% from the present holding of 9.67%.

The Big Fund's recent moves show a structural adjustment to its investments in the China's semiconductor industry. It is turning its focus from companies that have already achieved certain successes to others that still need financial support. Although the Phase One project is cutting shareholdings in some companies, the Phase Two project continues to increase its investment in the semiconductor sector.

In early March, Chinese memory chip maker YMTC saw a shakeup of its major stakeholders. The Big Fund's Phase Two project became its shareholder with a 12.24% stake, but the Phase One project's holding decreased from 24% to 12.87%.

The Phase Two project has also made several other investments recently. In January 2023, Hua Hong Semiconductor announced that it had teamed up with its subsidiary Huahong Grace Semiconductor, the Big Fund's Phase Two project and the Wuxi city government to form a joint venture. They will invest US$880 million, US$1.17 billion, US$1.17 billion and US$804 million respectively to expand 12-inch wafer foundry capacity at the joint-venture company. Earlier in June 2022, the Second Phase project also increased its stake in Hua Hong Semiconductor's subsidiary, Huahong Semiconductor (Wuxi).

Market observers said the Phase Two project will increase the proportion of investments in the equipment and materials sectors. It will also expand investments in emerging sectors, such as smart cars, smart grid, AI, IoT and 5G.

The Big Fund's Phase II project is expected to call a meeting soon to work out its investment strategy for 2023.