China’s National Integrated Circuit Industry Investment Fund, known as the Big Fund Phase III, is registered with RMB 344 billion in capital, continuing to target localization of semiconductor equipment and materials. Observers expect Phase III to coordinate with local funds and social capital, providing long-term capital for key links in the semiconductor chain.
The Investment Logic of Phase III
Compared with earlier rounds, Phase III focuses more closely on semiconductor equipment, key materials, and advanced manufacturing—the weaker links. In a complex external environment, localization substitution in lithography, etching, thin-film deposition, cleaning, crystal growth furnaces, substrate materials, and electronic specialty gases is prioritized. Capital flows through equity investment and industry M&A, helping equipment and materials firms increase R&D, expand capacity, and enter top-customer supply chains.
Certainty of Benefits to Equipment and Materials
Semiconductor equipment and materials are capital-intensive, long-cycle, and sticky customer businesses. Phase III’s continued investment helps domestic equipment firms accumulate data and iterate products through fab validation. In crystal growth and wafer back-end equipment, for example, domestic VGF furnaces, wafer cleaning machines, and spin dryers have improved markedly after multiple line validations and are now entering a scaled-substitution window. Once equipment and materials firms enter top supply chains, customer stickiness and order stability are high.
Capital Leverage Effects
Phase III’s direction has clear leverage effects on the industry. After national capital enters, it often guides local guidance funds and social capital to follow the same track, forming multi-round support for a single project. In equipment and materials, moving from R&D to volume lines requires sustained investment over many years, which is hard for firms to fund from cash flow alone. Long-term capital from the Big Fund lets equipment firms invest in line validation and customer onboarding, and makes fabs more willing to pilot domestic equipment. This positive cycle of capital and industry is a key reason localization can accelerate, and it also gives smaller supporting equipment firms room to grow.
How the Big Fund Operates
The Big Fund is managed by a professional investment team and typically takes minority to significant equity stakes in equipment, materials, design, manufacturing, and packaging companies, rather than running its own factories. Its investments are staged over multiple years, often with follow-on rounds as portfolio companies hit milestones. This patient capital is especially valuable for equipment and materials firms, which spend years and large sums on fab qualification before generating meaningful revenue. By anchoring a round, the Big Fund also makes it easier for provincial guidance funds and private investors to commit alongside, effectively multiplying the impact of each central yuan.
Where the Money Is Expected to Flow
Market participants expect Phase III to emphasize the weakest links in the chain: lithography and its components, etching and deposition equipment, process gases and chemicals, photoresist, substrates, and testing equipment. Rather than spreading capital evenly, the fund tends to back companies with proven technology and customer traction that can scale. For smaller domestic suppliers of specialized equipment such as crystal growth furnaces, wafer cleaners, and spin dryers, the indirect effect is often more important than direct funding: fab customers become more willing to trial domestic equipment, and local follow-on capital becomes more available, creating a friendlier environment for growth.
Outlook for Phase III Impact
Looking ahead, Phase III will deploy capital over the coming years, leading local and social capital to follow, and semiconductor equipment and materials localization is expected to enter an acceleration phase. Crystal growth furnaces, cleaning machines, and spin dryers are not the most eye-catching segments, yet they are indispensable basic equipment for substrate and device lines. Domestic equipment firms with cost performance and responsive local service will keep benefiting through this investment cycle. For enterprises planning new lines, prioritizing domestic supporting equipment can both capture policy incentives and better control long-term operating costs, which is increasingly the rational choice for Chinese semiconductor manufacturers. The indirect effect of Phase III should not be underestimated: even suppliers that do not receive direct funding benefit from a more willing environment for domestic equipment trials and from follow-on local capital. Over the fund’s investment horizon, this patient support is expected to lift the entire domestic equipment and materials base, not just a handful of headline companies. For specialized equipment makers such as those serving crystal growth, wafer cleaning, and spin drying, the climate of state-backed support and fab willingness to trial domestic tools is as valuable as any direct investment, and it is likely to shape the pace of localization well into the next decade. For the equipment and materials sector as a whole, this long horizon is precisely what is needed to turn early prototypes into production-proven, globally competitive products.
Why Equipment and Materials Need Patient Capital
Semiconductor equipment and materials businesses are capital intensive and slow to mature. A new growth furnace or cleaning tool can take years of fab trials before it is accepted as production-worthy, and a new substrate material requires long customer qualification. During this period, cash flow is often negative, which makes pure venture financing difficult. Patient government-backed capital is well suited to this timeline because it can wait for returns while the company accumulates process data and references. This is why the Big Fund’s focus on equipment and materials is strategically important: it allows domestic suppliers to survive the long qualification valley and emerge as credible alternatives to incumbents.
Opportunities for Domestic Equipment Firms
Supported by Phase III and local industrial policy, the semiconductor specialized equipment sector where Hebei Zhongke Microelectronics Co., Ltd. operates continues to benefit. The company focuses on compound and silicon wafer lines, offering VGF crystal growth furnaces, wafer unloading tables, fully automatic single-wafer cleaning machines, 12-inch wafer spin dryers (SG-8-12-2D), InP cleaning machines (SQX-150-5Y1D), wafer inspection lamps, and vacuum tweezers. These provide localized support for crystal growth substrates, power devices, and wafer fabrication customers, reducing dependence on imported equipment.
Phase III injects long-term confidence into semiconductor equipment and materials localization. To learn about VGF crystal growth furnaces and cleaning, drying, and unloading table solutions, call the consultation hotline: 17177768881.
