Chinese PE crowds into semiconductors as export restrictions grow

Private equity investors in China have been investing record amounts into the country's semiconductor industry at a time when foreign supply has been tightening.

Japan and the Netherlands plan to follow America's lead by restricting chip technology exports to China, according to reports. In October, the US banned the export to China of chips made anywhere using US technology. China is looking to shore up its domestic chipmaking industry in the face of these growing restrictions, and its PE industry is playing a major role.

China-based PE funds poured $10.12 billion into the industry globally, according to PitchBook data—with the lion's share going into Chinese companies. Recent deals include Huatai International Private Equity Fund's 1.75 billion yuan (about $257.1 million) investment in Jiangsu Shekoy Semiconductor this month. The Netherlands received the next-largest share of investment outside the Greater China region.
   
The technology is a focus for the US-China rivalry due to both its commercial and military applications. It is also part of a broader trend of the global chip supply chain gradually becoming more localized.

The largest investments by Chinese PE firms have been mostly domestic, with the $9.45 billion takeover of Tsinghua Unigroup in 2022 by state-owned JianGuang Asset Management and Wise Road topping the list.

The same investors backed the $2.75 billion acquisition of Dutch semiconductor company Nexperia in 2017. The UK scrutinized Nexperia last year and ordered it to divest a chip factory located in the country due to national security concerns.

Featured image by Gorodenkoff/Shutterstock

This article originally appeared on PitchBook News