BEIJING—China has set up a new national semiconductor fund of 204.2 billion yuan ($28.9 billion), as it seeks to nurture its domestic chip industry and close the technology gap with the U.S.

The government-backed fund is bigger by some $9 billion compared with a similar fund launched in 2014 that had raised 139 billion yuan, according to corporate registration information, which showed the fund was established on Tuesday.

China’s...