China Shifts Chip Race Strategy: Billions to AI, HBM, and Advanced Packaging

China's state-backed 'Big Fund', now in its third phase, is redirecting its financial support towards advanced chip packaging, manufacturing equipment and materials, and AI chip development. The fund, which launched its third phase in 2024, previously supported a wide range of industry sectors including electric vehicles, traction batteries, silicon wafers, lithography equipment, new materials, and semiconductor component development. The first phase started in 2014, distributing over $19 billion across 75 projects from 23 companies, boosting contract chip makers like SMIC and HuaHong, packaging companies JCET and Tongfu Microelectronics, equipment supplier Naura Technology, chip design software developer Empyrean Technology, and memory maker YMTC. The second phase began in 2019, raising about $30 billion to strengthen the semiconductor industry amid US sanctions on Huawei, with SMIC receiving $1.5 billion and memory makers CXMT and YMTC also strengthening. The third phase focuses on advanced packaging and integration methods, chip production equipment, new materials, and AI chip development, with investments already going to Tiansui Xinyuan Technology and Anhui Juhe Microelectronics for packaging, and significant funds into HBM memory and materials. Chinese authorities are also supporting universal accelerators and high-speed memory integration on such chips, as well as high-speed data interfaces.