China’s state-backed Big Fund has become the third-largest shareholder of the Semiconductor Manufacturing International Corporation (SMIC), the country’s largest wafer foundry, after SMIC completed its acquisition of a manufacturing subsidiary in the largest merger and acquisition deal ever recorded on Shanghai’s Star Market.

The landmark deal, first proposed last August, was completed with SMIC issuing 547 million shares worth 40.6 billion yuan (US$6 billion) to five shareholders of its subsidiary Semiconductor Manufacturing North China (Beijing) Corporation (SMNC) for a total of 49 per cent of the company.

The shareholders, which includes the state-backed National Integrated Circuit Industry Investment Fund, also known as the Big Fund, will be among the top owners of SMIC after the deal. SMIC said in an earlier filing in April that this transaction would “further improve the company’s asset quality, enhance business synergies and promote long-term development”.

SMNC, founded in 2013, focuses on 12-inch wafer foundry services and has been an important manufacturing base for SMIC in Beijing.

“SMIC’s acquisition of minority stake in SMNC is essentially aimed at addressing its production capacity shortage and converting the premium from external shareholders into internal strategic benefits,” said Lu Kelin, founder of consultancy Lukedao Tech.

The deal underscores how Beijing still relies on the financial muscle of the Big Fund to finance the expansion and consolidation of its domestic semiconductor supply chain, ensuring the country’s chip self-sufficiency goals remain on track amid tightening US export controls.