By Gabby Chen

(JW Insights) Mar 31-- China's National Integrated Circuit Industry Investment Fund, also known as the Big Fund, has reportedly made strategic adjustments to its portfolio by reducing shareholdings in certain Chinese IC companies. However, the Big Fund Phase II continues to increase its investments, particularly in the equipment and materials sectors, according to a recent report by JW Insights analyst Li Zhengcao.

The Big Fund Phase I was set up in 2014 to support China's homegrown chipmakers and raised RMB138.72 billion ($19.63 billion). Its investment scope covered manufacturing, design, packaging and testing, equipment, and materials, with a 15-year investment period. The fund's shareholders include China's Ministry of Finance (MOF), China Development Bank Capital (CDB Capital), China National Tobacco Corporation (CNTC), and E-Town Capital, among others, according to the public announcement.

The Phase II of the Big Fund was launched in 2019, nearly twice as big at RMB204.15 billion yuan ($28.9 billion). Its shareholders include MOF, CDB Capital, CNTC, state-owned and private enterprises, and local investment funds.

Five Chinese semiconductor companies disclosed the Phase I of the Big Fund would reduce its holdings in their companies over an eight-day period.

Shanghai-based Wanye Enterprises(万业企业), an IC equipment provider, revealed on March 15 that its third largest shareholder - the Big Fund - will reduce its holding by about 1% for its own management needs. The Big Fund currently holds a 5.22% stake in Wanye.

Meanwhile, Changchuan Technology(长川科技), a semiconductor equipment company, said on March 16 that the Big Fund would reduce its stake in the company by 2% for its management needs.

Other companies that the Big Fund will reduce its holdings are Goke Microelectronics(国科微), an IC design company, Anji Micro(安集科技), a Chinese CMP polishing slurry supplier, and Jingjia Micro(景嘉微), a GPU chip maker.

The Big Fund's move indicates a structural adjustment to its investments in China's semiconductor industry. It is turning its focus from companies that have already achieved success to others that still need financial support.

While the Big Fund Phase I reduced its shareholdings in some companies, the Phase II of the Big Fund is active and has made several investments since 2023 in the industry.

One recent case is the $880 million in HuaHong Semiconductor(华虹半导体), a leading foundry based in Shanghai. On January 18, the company announced a joint venture with the Big Fund and two other partners.

In March, the Big Fund's second phase also took a stake in YMTC(长江存储), China's leading memory chip manufacturer, with an investment of RMB12.9 billion ($1.87 billion).

These investments signal that the Big Fund Phase II aims to support the expansion of fabs and accelerate the localization process. In addition, it has also increased the proportion of investment in downstream applications, according to the JW Insights report.

The Big Fund publicly revealed its future layout. Its main focus is on supporting leading companies to expand and boost their capabilities, while also promoting collaboration and overseas development among different industries. Additionally, it will continue to push the downstream applications of domestic equipment materials.