Chinaโ€™s state-backed funds injected more than $2 billion into domestic chip maker Semiconductor Manufacturing International Corp. (SMIC) as the country pushes for semiconductor independence from the US.

Why it matters: China has stepped up efforts to build a chip designing and making ecosystem inside the country with the help of massive state-based investment schemes and a financial market that allows more private capital to access.

  • The move came as the Trump administration announced new rules Friday that will bar Chinese telecommunications equipment maker Huawei and its suppliers from using American technology and software.

Details: Shanghai-based SMIC said Friday that the China National Integrated Circuit Industry Investment Fund and the Shanghai Integrated Circuit Industry Investment Fund would invest $1.7 billion and $750 million respectively into one of its wafer plants.

  • The plantโ€™s registered capital would rise from $3.5 billion to $6.5 billion after the investment while SMICโ€™s stake in the plant would drop from 50.1% to 38.5%, the chip maker said.
  • The national fund and the Shanghai-based fund will own 23.08% and 11.54%, respectively, of the semiconductor fabrication plant.
  • The plant mainly produces 14-nanometer wafers.

Context: The Trump administration announced Friday a new rule that will block companies around the world from using American-made components and technology to design or produce chips for Huawei or its subsidiaries.

  • China National Integrated Circuit Industry Investment Fund, also known as the โ€œBig Fund,โ€ raised RMB 200 billion (around $28.1 billion) in its second financing round in July.
  • The state-backed fund was set up to invest in chip manufacturing and designing in 2014 and is backed by Chinaโ€™s Ministry of Finance, the China Development Bank Capital, as well as several other state-backed enterprises.
  • Hong Kong-listed SMIC said earlier this month it is seeking to list on Shanghaiโ€™s Nasdaq-like STAR Market and raise around RMB 1.69 billion.
  • Reuters reported last month that Huawei is shifting production of its in-house designed chips away from Taiwan Semiconductor Manufacturing Co Ltd (TSMC) to SMIC.
  • TSMC, the world’s largest contract chip maker, has halted new orders from Huawei in response to Washington’s new rule change, Nikkei Asian Review reported Monday.

Writing about semiconductors and telecommunications.