China hits Big Fund chip executives with corruption probes

China’s top anti-corruption watchdog has launched investigations against several executives linked to the country’s biggest chip investment fund, as Beijing steps up scrutiny of the sector in its race for technological self-sufficiency.

Chinese authorities revealed this week that they are investigating three former executives linked to the National Integrated Circuit Industry Investment Fund, dubbed the ‘Big Fund’, which has raised $51 billion in its last two rounds. of financing.

China’s Central Commission for Discipline Inspection (CCDI) said it was investigating Du Yang, a former director of SINO IC Capital, which manages the Big Fund’s assets, for “suspected serious violations of disciplines and laws”. The CCDI said it is also investigating two former SINO IC Capital investment managers, Yang Zhengfan and Liu Yang.

At least five chip fund executives have been investigated for fraud in the past two months. The investigations follow the collapse of state-backed conglomerate Tsinghua Unigroup, a semiconductor maker that began a court-ordered restructuring last year.

Beijing is under pressure to ramp up its semiconductor industry as growing US restrictions threaten its chip supply chain. The FT reported this week that Taiwan security officials want Foxconn to drop its stake in Tsinghua Unigroup as the country seeks to align itself more closely with the United States.

“Beijing is increasingly eager to see companies perform,” said Linghao Bao, an analyst at Trivium China. “There is no tolerance for corruption here.”

He added, “You can bet Beijing isn’t happy that one of its biggest state-owned semiconductor companies just went bankrupt.”

On July 30, the CCDI said it was investigating Ding Wenwu, the Big Fund’s chief executive, for similar allegations. Two weeks earlier, Lu Jun, the former head of SINO IC Capital, was arrested by the anti-corruption body.

Chinese media outlet Caixin reported last month that Wang Wenzhong, a former classmate of Lu who ran a smaller fund in partnership with the Big Fund, and Zhao Weiguo, who ran the cash-strapped chipmaker giant. Tsinghua Unigroup money for a decade, had both been placed under investigation. Diao Shijing, former co-chairman of Tsinghua Unigroup, is also under investigation, Caixin reported last week.

The Financial Times has not independently verified the cases. Wang, Zhao and Diao could not immediately be reached for comment. The Big Fund did not immediately respond to a request for comment.

The Big Fund, which was established in 2014 to foster China’s chip autonomy, raised Rmb 138.7 billion for its first round of funding and Rmb 204 billion for its second round. The fund is backed by deep-pocketed public investors, including the Ministry of Finance, China Tobacco, China Mobile and China Development Bank.

Over the years, the Big Fund has expanded its investment portfolio from chip manufacturing to commodities and has provided funding to local champions such as Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor, two of the largest country’s chipmakers.

But China’s ambitions for technological self-sufficiency have been hit by Washington’s expanding sanctions and export restrictions, which have forced SMIC to abandon plans to manufacture certain types of advanced chips and stalled its global growth.

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