China is reportedly spending big to boost its production of chips for AI and smartphones after the US cracked down on exports

• China is planning a $41 billion fund to boost its semiconductor industry, per Reuters.
• It would the biggest of three funds launched by the country.
• The move comes as the US clamps down on exporting chips to China. 

China is planning a huge state-backed fund to boost its production of semiconductors after the US cracked down on exporting chips to the country, Reuters reported.

The fund aims to raise $41 billion for the sector, and one of its main areas of investment will be equipment for chip manufacturing, according to the news agency.

It will be launched by China’s “Big Fund” — officially known as the China Integrated Circuit Industry Investment Fund. Its previous funds launched in 2014 and 2019 raised about $19 billion and $27 billion respectively, per Reuters.

Semiconductors are materials such as silicon, which are used in electronic circuits so they have a huge range of technical applications. Most recently, they’ve been under the spotlight since the AI boom as countries race to see who can become dominant in the sector.

But even before then, the US was clamping down on exporting semiconductors to China. Last October, the Department of Commerce announced updates to export controls that restrict China’s ability to develop advanced semiconductors or supercomputers.

TSMC, the world’s most valuable semiconductor company, is based in Taiwan, but is currently building a $40 billion factory in Phoenix, Arizona to guard against fears of an invasion from China.

A former national security advisor previously said the US would rather destroy Taiwan’s semiconductor factories than let China gain control of them.

Chinese President Xi Jinping has often spoken about the importance of building more self-sufficiency in the sector.

“To open up new areas and new arenas in development and foster new growth drivers and new strengths in face of fierce international competition, China should ultimately rely on scientific and technological innovation,” he said in March, per The Guardian.

A huge new state-backed fund would bolster that aim in the face of sanctions.