Xiaomi Billionaire Leads New Fund to Boost China’s Chip Industry

Mr. Lei is chief executive and founder of Xiaomi, one of China’s largest smartphone manufacturers and the No. 3 smartphone company in the world, behind Apple Inc. and Samsung Electronics Co., according to data tracker Canalys. He is also co-founder and chairman of Kingsoft, a provider of gaming, cloud and office-software products, and is the company’s largest shareholder.

The announcement of the new fund, disclosed in a filing Thursday with the Hong Kong stock exchange, says it will focus on investments in chips and related technologies. It lists Mr. Lei as chairman of the unnamed fund’s investment-decision-making committee.

Xiaomi is the fund’s largest backer, contributing about a third of the fund’s capital via two subsidiaries, according to the announcement. Kingsoft said a subsidiary would contribute 500 million yuan to the fund, while other investors include entities backed by the Tianjin and Beijing governments.

The fund is the latest in a number of such investment efforts across China that have emerged in recent years as the country has sought to boost self-sufficiency in semiconductor technology and counter U.S. sanctions against some of its top chip makers. The effort has gained urgency after recent export restrictions that aim to limit China’s access to advanced chips and chip-manufacturing technology.

Japan and the Netherlands have agreed to join the U.S. in restricting China’s access to chip-manufacturing equipment, part of an effort to slow China’s military development by cutting it off from some advanced technologies.

The fund’s announcement says its investments will “conform to the national innovation-driven development and industrial transformation trends.”

It also says it plans to invest in other high-tech companies with businesses related to chips, including artificial intelligence, new materials, smart manufacturing, display technology and automotive electronics.

Although China has built fabrication facilities capable of producing lower-end chips, it has struggled to build capacity for top-of-the-line circuits used in cutting-edge data-processing work and smartphones.

New U.S. restrictions have further eroded China’s access to high-end chips and the equipment needed to manufacture them. Chip companies generally largely rely on a small number of suppliers, many based in the U.S. and its allies, for such equipment, giving Washington leverage in this key area of competition.

Unlike rival Huawei Technologies Co., Xiaomi has managed to avoid U.S. sanctions and has been expanding aggressively overseas in recent years, making headway in markets in Europe and in India. The company buys chips from a number of major U.S. technology companies, including

Qualcomm Inc.,

used to power an array of gadgets it sells, from smartphones to scooters and air purifiers.

In 2021, Xiaomi successfully challenged its addition to a blacklist maintained by the Defense Department that banned U.S. investors from investing in the company. The company said the department erred in claiming that Xiaomi had ties to the Chinese military, becoming a rare example of a Chinese company that successfully won a reprieve from a Trump-era action.

Xiaomi already invests in an array of Chinese technology startups, including chip firms, via an existing investment arm called Xiaomi Ventures.

Kingsoft makes an array of office software used in China, including the popular WPS word-processing program. A U.S.-listed subsidiary,

Kingsoft Cloud,

applied for a dual listing on the Hong Kong stock exchange last year.

Write to Dan Strumpf at Dan.Strumpf@wsj.com