China is set to launch a new state-backed investment fund aimed at raising $40 billion for its semiconductor sector, according to two people familiar with the matter, as the country ramps up efforts to catch up with the United States and other competitors. The China Integrated Circuit Industry Investment Fund, also known as the Big Fund, is expected to launch the largest of three funds.

Its target of 300 billion yuan ($41 billion) exceeds similar funds raised in 2014 and 2019, which raised 138.7 billion yuan and 200 billion yuan, respectively, according to government reports.

According to one of the two people and a third person familiar with the matter, one of the major areas of investment will be chip manufacturing equipment.

President Xi Jinping has long emphasised the importance of China achieving self-sufficiency in semiconductors. This need has become even more pressing since Washington imposed a slew of export controls in recent years, citing concerns that Beijing could use advanced chips to boost its military capabilities.

The United States imposed sweeping sanctions in October, restricting China's access to advanced chipmaking equipment; Japan and the Netherlands followed suit. According to two of the people, the new fund was approved by Chinese authorities in recent months. According to one source, China's finance ministry intends to contribute 60 billion yuan. Other contributors were not immediately identified.