SMIC, Chinese investors to launch semiconductor fund

The vehicle, known as the IPV Capital Global Technology Fund, will be managed by IPV Capital, a Chinese GP that specializes in semiconductor-related businesses, according to a filing. SMIC will contribute RMB165 million to the fund, while China Integrated Circuit Industry Investment Fund (IC Fund) and an entity with links to the Zhejiang provincial government will put in RMB800 million and RMB635 million, respectively.

IC Fund was established as a RMB140 billion specialist investment vehicle in 2014 by several government-owned organizations and is managed by Sino IC Capital. It invests across the integrated circuit value chain, including IC chip manufacturing as well as chip design, packaging and testing, and equipment and materials. The fund has a 15% equity stake in SMIC.

It is a government priority to accelerate the development of the integrated circuit industry in China, with $150 billion expected to be spent over the next decade in pursuit of this cause. The country consumes about $169 billion of microchips every year, more than any other country in the world, but it imports more than 90% of its integrated circuits (ICs), the upstream element of the semiconductor business.

Numerous attempts have been made to acquire semiconductor assets overseas, resulting in US regulators blocking several transactions. In February, Sino IC terminated its proposed $580 million acquisition of Xcerra after failing to receive clearance from the Committee on Foreign Investment in the United States (CFIUS). This came several months after Canyon Bridge Capital Partners appealed directly to President Donald Trump over its bid for Lattice Semiconductor only to see the deal nixed.

Sino IC has also been active domestically, agreeing to buy a 19% stake in Hua Hong Semiconductor for $400 million and contributing to a RMB150 billion financing package for Tsinghua Unigroup, which operates under Tsinghua Holdings. Unigroup is expected to drive consolidation of the local semiconductor industry.

Shanghai-headquartered SMIC is China's largest semiconductor foundry by scale and among the biggest in the world. It generated revenue of $2.9 billion in 2016 while net profit came to $309.9 million.

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• Topics
• Greater China
• Technology
• Industrials
• Buyout
• Fundraising
• China