China is making swift progress on its CNY200 billion fund aimed at investing in home-grown semiconductor development, as it tries to reduce dependence on foreign chips amid the tech war with the U.S. The state-backed China Integrated Circuit Industry Investment Fund, also known as the country’s “Big Fund”, has completed raising capital for its second tranche. New investment is likely to be spent in the downstream supply chain, such as chip design, advanced materials and equipment.

China has recently toned down its Made in China 2025 strategy, but is quietly continuing to invest in upgrading its manufacturing industry. The U.S. regards elements of the Made in China 2025 policy as unfair state intervention in the economy and has recently ramped up pressure on the country’s hi-tech industry with trade restrictions. Telecoms gear maker ZTE was brought to the brink of collapse last year when the U.S. cut off the supply of American technology to the company, citing violations of a previous agreement that censured the firm for breaching sanctions against trade with Iran. In May, the U.S. Commerce Department placed Huawei Technologies on the Entity List, alleging that Huawei was engaged in activities that are contrary to U.S. national security or foreign policy interest. Huawei has repeatedly denied that this is the case and has called for more open, consistent standards when it comes to the security evaluation of next generation 5G network equipment.

China does have an import dependence weakness. Although the country is estimated to make more than 90% of the world’s smartphones, 65% of personal computers and 67% of smart televisions, it has to source most of the chips that go into these devices from overseas. The value of China’s annual chip imports has surpassed that of oil in recent years, surging to USD312 billion in 2018. Incorporated in 2014, the Big Fund is aimed at leading national efforts to catch up in the global semiconductor industry by backing chip start-ups and research and development (R&D) via the private and secondary markets. China Development Bank Capital, China Tobacco, E-Town Capital, China Mobile, Guosheng Group, China Electronics Technology Group Corp, Beijing Unis Communications Technology Group and Sino IC Capital were among the first batch of investors in the fund, when it raised CNY138.7 billion in its first round in 2014. The fund operates as a corporate entity under the Ministry of Industry and Information Technology (MIIT) and the Ministry of Finance, the South China Morning Post reports.

While China is still lagging behind the U.S. in the manufacturing semiconductors, Alibaba Group unveiled its first self-developed 16-core microchip processor. Developed by Alibaba’s chip subsidiary Pingtouge, the Xuantie 910 processor is based on the open-source architecture RISC-V, as opposed to the more commercially-used ARM architecture. The RISC-V architecture is not affected by trade restrictions, allowing Chinese firms to use it without having a commercial license from companies like ARM, which is subject to US technology bans like the one imposed on Huawei Technologies in May. The Xuantie 910 is currently the most high-performance RISC-V processor on the market and its increased processing power can help reduce the cost of chip production by more than 50%, the South China Morning Post reports.

Huawei Technologies said it plans to invest CNY3 billion over the next five years to build an ecosystem for its ARM-based server chips. Huawei’s ARM-based CPU, called the Kunpeng 920, was unveiled in January. It is designed to meet the exponentially growing demand for bigger computing capabilities while slashing power consumption. Huawei will not sell its chips separately, but only sell servers powered by its CPUs. The Shenzhen-based company said its servers can be used for big data, distributed storage, and ARM-native applications.