China corruption: Executive who oversaw main semiconductor industry fund under investigation
The former chief executive at the company that manages China’s main semiconductor industry investment fund has been put under investigation by the Central Commission for Discipline Inspection (CCDI), the country’s top anti-corruption watchdog.
The investigation of Lu Jun, who stepped down as head of investment firm Sino IC Capital in late 2020, was announced by the CCDI in a post on its website last Friday. CCDI, the highest internal control institution of China’s Communist Party, did not mention the reason behind its inquiry or the potential penalties that Lu faces.
Beijing-based Sino IC Capital is responsible for managing the assets under the state-backed China Integrated Circuit Industry Investment Fund, also known as the “Big Fund”, which is the largest such enterprise in the country with more than 120 billion yuan (US$17.75 billion) in capital.
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Founded in October 2014, the Big Fund serves as China’s primary financing vehicle for investing in chip start-ups and some of the domestic industry’s major enterprises. More than 67 per cent of its investments went to support China’s contract integrated circuit makers, including Semiconductor Manufacturing International Corp and Hua Hong Semiconductor.
The headquarters of Semiconductor Manufacturing International Corp in Shanghai. The mainland’s biggest contract chip maker is an investee company of the state-backed China Integrated Circuit Industry Investment Fund. Photo: Bloomberg alt=The headquarters of Semiconductor Manufacturing International Corp in Shanghai. The mainland’s biggest contract chip maker is an investee company of the state-backed China Integrated Circuit Industry Investment Fund. Photo: Bloomberg>
The CCDI’s investigation of Lu, who had also quit his management role at the China Development Bank last November, may raise speculation about his actions or omissions now under review, and whether these had any impact on the country’s efforts to develop a self-sufficient and competitive semiconductor supply chain.
During an industry summit in December 2019, Lu said the Big Fund had a large amount of fresh capital to continue investing in semiconductor firms and related critical industries, such as 5G mobile communications.
This was not the first time that an executive previously involved with the Big Fund was put under review by the CCDI. Last November, Gao Songtao, formerly a vice-president at Sino IC Capital, was investigated by the CCDI for alleged corruption.
The escalating tech war between China and the US made the Big Fund an integral part of Beijing’s efforts to develop the domestic semiconductor industry’s downstream supply chain, including chip design, advanced materials, packaging and equipment.
Spurred on by Beijing, various Chinese companies have raised their investments in the domestic semiconductor sector. As of March this year, 81 companies listed in mainland China have set up industrial funds, with more than 60 per cent of them targeting mergers and acquisitions in the semiconductor and new energy sectors, according to a report by state-owned newspaper Securities Daily.
The Big Fund has also encouraged local governments across the mainland to ramp up their support for the domestic semiconductor industry. By 2019, various chip industry investment funds in the country had nearly 500 billion yuan in assets, according to an estimate by the China Semiconductor Industry Association.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.
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