China backs chipmakers as 'one team,' while Korean firms go it alone

China’s semiconductor push is powered not only by technology and production capacity. The “one-team” system that brings together the central and local governments, state-owned financial institutions and companies gives its chipmakers a competitive edge, while Korean companies are largely left to fend  for themselves.

China's National Integrated Circuit Industry Investment Fund, better known as the “Big Fund,” is a cornerstone of the country's efforts to foster its semiconductor industry.

It raised 138.7 billion yuan ($20.7 billion) for the first phase of the fund in 2014, 204 billion yuan for the second in 2019 and 344 billion yuan for the third in 2024. The three phases total 686.7 billion yuan, equivalent to more than 130 trillion won ($96.6 billion).

China’s ministry of finance, state-owned enterprises and major state-owned banks participated in the Big Fund. Under the system, the central government sets industrial strategy, financial institutions provide long-term financing and local governments support companies with land, electricity, water and other infrastructure. The structure spreads investment risk rather than leaving companies to shoulder it alone.

The funds have gone to companies including Semiconductor Manufacturing International Corporation, which is China’s largest foundry by revenue. Hua Hong Semiconductor and NAND flash memory maker Yangtze Memory Technologies have also received the funding.

CXMT became the world's fourth-largest dynamic random-access memory (DRAM) maker by market share in 2025 — less than a decade after it was founded in 2016. But its rapid rise is difficult to explain through conventional market logic.

Despite posting a combined net loss of 21.13 billion yuan from 2023 through 2025, the company poured 185.2 billion yuan — roughly twice its revenue over the same period — into research and development and capital expenditures.

Behind that investment was not only the Big Fund but also the so-called patient capital provided by the local government of Hefei, Anhui. Patient capital refers to capital willing to tolerate losses over an extended period to give companies time to become competitive.

State-owned capital from Hefei financed about 80 percent of CXMT’s initial DRAM project in 2016, an investment that helped foster the city’s semiconductor industry. More than 500 integrated circuit-related companies are now clustered in Hefei.

But the situation is different for Korean companies. Samsung Electronics and SK hynix are shouldering much of the burden not only for investment, employment and technological development but also for supporting suppliers and creating jobs in local communities.

The Korean government plans to attract 622 trillion won in private investment for the semiconductor cluster in southern Gyeonggi through 2047. It has also prepared 17 trillion won in low-interest loans and a 1.1 trillion won semiconductor ecosystem fund.

Most of the 622 trillion won, however, is to be borne by companies including Samsung Electronics and SK hynix. Government support is also weighted toward loans and tax credits, in contrast to China’s approach of directly sharing investment risk.

Infrastructure supply poses another challenge. The national and general industrial complexes in Yongin, Gyeonggi, will require more than 10 gigawatts of additional electricity and 1.108 million metric tons (1.22 million short tons) of water per day for the semiconductor cluster.

But opposition from residents to the construction of transmission networks and complicated permitting procedures have delayed infrastructure development, raising concerns that factory operations could face delays. Critics say companies are being asked to invest, create jobs and contribute to local communities while infrastructure that should be provided by the state is slow to materialize.

As competition among countries intensifies in the chip war, those from the semiconductor industry are calling for greater government support.

“Semiconductors are an industry where stopping investment inevitably means falling behind competitors in the next upcycle, so long-term policy financing and tax support must be provided to enable companies to maintain research and development, capital expenditures and orders for materials, parts and equipment even during downturns,” said Park Gun-su, vice chairman of the Korea Semiconductor Industry Association.

“With China catching up through strong state support, Korea needs a coordinated effort from the government, lawmakers, financial institutions and companies,” Park added.

BY PARK YOUNG-WOO [[email protected]]