The US and China are worlds apart when it comes to venture finance for computer processors.

In 2023, the United States received just 11% of worldwide semiconductor startup funding, while China received 75% of the same, according to a recent report from market research firm PitchBook. According to PitchBook, semiconductor startups are businesses that focus on production, equipment, and chip design and manufacture.

Following more stringent US export restrictions on AI processors from companies such as Nvidia and AMD, China has prioritized developing its semiconductor sector. According to reports, it is introducing the Big Fund, a new state-backed investment vehicle, with the goal of raising roughly $40 billion for the production of chips. China must become economically self-sufficient, particularly in technology, as the country’s president, Xi Jinping, has long emphasized.

According to PitchBook, two well-known Chinese chip firms include Biren Technology, which has $921 million in funding, including a $280 million government investment, and SJSemi, which has raised $1 billion to date.

“It’s not very different from the US using VC to create titans like Intel and Fairchild Semiconductor in the ’50s and ’60s,” PitchBook analyst Ali Javaheri wrote in the report.

Is the US CHIPS Act helping electronic manufacturers in the country?

The CHIPS Act, which aims to lessen dependency on China by giving over $50 billion in subsidies for local semiconductor manufacturing and research, was passed in 2022. However, last year, the United States’ share of worldwide chip venture capital funding decreased little.

The majority of US government subsidies are intended to support the establishment or growth of US semiconductor manufacturing. It is evident that producing chips is expensive: Sam Altman, the CEO of OpenAI, is attempting to fund billions of dollars in order to construct his own AI semiconductor plant, implying that there may not be enough chips for everyone.