Dachang CVC is “competing” on the chip circuit.

In mid-March, ByteDance launched for the first time this year and took a stake in a memory chip company. Its subsidiary, PICOHEART (SG) PTE.LTD., became a shareholder of Xinyuan Semiconductor (Shanghai) Co., Ltd. (“Xinyuan Semiconductor”), holding 9.5% of the shares, ranking the third largest shareholder. A ByteDance spokesperson also confirmed the news.

At about the same time, Wuxi Muchuang Integrated Circuit Design Co., Ltd. (hereinafter referred to as “Wuxi Muchuang”), which focuses on security chips, announced the completion of the A3 round of financing of hundreds of millions of yuan led by Ant Group. This is the first investment publicly disclosed by Ant Group this year.

The two major manufacturers invariably invested their capital in the chip circuit.

An “influx” of chip investment

There are not a few big manufacturers that focus on the chip circuit like Byte and Ant. Tencent, Ali, and Meituan have all paid a lot of money.

At the end of last year, the hundreds of millions of yuan of pre-B financing for the high-end SiC power device developer and manufacturer Clean Semiconductor was led by Meituan Dragon Ball, and Meituan Battle Investment also participated in the follow-up investment.

In the upper reaches of the chip manufacturing industry, Meituan is more involved. Behind optoelectronic chip developer Changxinsheng, digital-analog mixed-signal chip developer Cygnuo, single-photon sensor chip developer Lingming Photonics, AI vision processor chip Aixin Yuanzhi, and wafer manufacturer Rongxin Semiconductor have all appeared behind the scenes.

Tencent's investment in the chip circuit is more biased towards “continuous betting.” For example, Suiyuan Technology, a chip unicorn company that has already been incubated, has invested and supported Suiyuan Technology six times in a row since leading the Pre-A round in 2018. In September of last year, Suiyuan Technology completed Series D financing of 2 billion yuan, with a public valuation of over 16 billion yuan. Tencent is its controlling shareholder and currently holds 21.371% of the shares.

With such a “heavy bet” investment, Tencent has worked on the chip circuit more than once. In 2022, Tencent invested hundreds of millions of yuan in a new round of financing for DPU startup Yunbao Smart, and the post-investment valuation reached nearly 9 billion yuan.

This is the third time Tencent has invested in the DPU company, which has been in existence for less than 2 years. According to business information, Tencent currently holds 23.9774% of Yunbao's shares and is also its controlling shareholder. Previously, most of Tencent's shares in the investee companies did not exceed 20%.

In 2022, Tencent and Ali also teamed up to bid for Changxin Storage, a super unicorn on a chip track. Changxin Storage is a leading domestic DRAM chip. This is one of the infrastructure for the semiconductor industry. In the second half of 2021, Changxin Storage completed Series C financing, and the valuation has risen to over 39 billion yuan.

In February 2022, Changxin Storage's shareholder list was changed. Tencent, Ali, and Alibaba's Yunfeng Fund all quietly appeared, and the company's registered capital reached approximately RMB 48.576 billion.

Prior to that, Ali had been deeply involved in the chip field for a long time, not only establishing its own “core making” company, Pingtou Ge, but also successively invested in 5 chip companies, including Cambrian, Barefoot Networks, Shenzhen, Endurance (Kneron), and ASR (ASR).

Established Internet giants are already operating on the chip circuit, and newcomers to the Internet industry are beginning to pour in. Byte has gone a long way and has successively invested in a number of companies, including mixed-signal chip supplier Juxin Microelectronics, data center network chip company Yunmai Chiplink, RISC-V company Rex Silicon, GPU chip designer Moore Thread, and diffraction optical chip manufacturer Guangzhou Semiconductor.

The figures of 37 Entertainment and Miha Tour have also repeatedly appeared on the chip track. Since this year alone, 37 Mutual Entertainment has taken a stake in two chip companies, Core Vision and Guangzi Technology. At the end of last year, they also joined Miha Tour to invest in Radiotech Semiconductor.

Regarding the influx of established manufacturers and newcomers to the Internet, investors from a semiconductor circuit agency told reporters that Tencent and Ali have actually continued to increase their investment in chip semiconductors since 2018. The logic of their entry is mainly because the demand for chips and computing power by major manufacturers has continued to grow, and changes in external geo-environmental factors have also intensified this process.

Another investor with a background in a major manufacturer said that adding chip semiconductors is the result of changes in the investment cycle. Through model innovation, the entrepreneurial style of reaping the dividends of the Internet is difficult to get out of. Basically, the projects I'm looking at now are all on a hard technology circuit. Chip semiconductors are also popular, and they have synergy with the parent company's business. From the perspective of industrial capital, large manufacturers CVC have a certain advantage in investing in this field.

Direct throw and “grab both hands” as an LP

It is worth noting that the way big manufacturers lay out chip tracks is being enriched. In addition to direct investment, some major manufacturers have already begun to create LPs to leverage more opportunities on the chip and semiconductor circuit.

At the end of last year, Ali and Ant jointly increased Fengrui's capital.

According to CIFA Venture Capital - Executive Data, Shanghai Fengrui Ruijia Investment Center (Limited Partnership) under Fengrui Capital added partners, including Zibo Huahan Dingsheng Equity Investment Partnership (Limited Partnership), Shanghai Xingjia Equity Investment Partnership (Limited Partnership), Alibaba (China) Co., Ltd., and Yunyong Industrial Win-win (Beijing) Venture Capital Co., Ltd., a subsidiary of Ant Group.

As a result, the investment amount of the investment center increased from RMB 1 million to RMB 820 million, an increase of 81,900%. An investor familiar with Fengrui Capital told the reporter that the underlying logic should be related to Fengrui Capital's layout in the semiconductor field in recent years.

Fengrui Capital has accumulated a lot of investment in chips and semiconductors. According to data from the Financial Services Association Venture Capital Connect - Central China, Fengrui Capital has invested in 20 semiconductor chip companies, including Xinyi Information Technology, Gatland Microelectronics, Chipvision, Xizhi Technology, Fidelity Electronics, Luowei Technology, Elfa Optoelectronics, and Multi-Sensor Technology.

The same gameplay is also Miha Tour and 37 Entertainment. At the end of 2021, Mihayou pledged 50 million yuan to invest in Wu Yuefeng Capital's new fund, Nanjing Wuyuefeng Huixin Venture Capital Partnership (Limited Partnership).

In the industry, Wu Yuefeng Capital is recognized as a first-line semiconductor investment agency. Pan Jianyue and Wu Pingping's founding partners have served as executives of US companies such as Synopsys and Zhanxun Communications. The fund cooperating with Miha Tour has now invested in 7 projects, almost all of which are related to chips and semiconductors.

Since then, the investment landscape of Miha Tour has expanded again. In 2022, Miha Tour, 37 Mutual Entertainment and VR leader Goertek Co., Ltd. signed a partnership agreement to launch venture capital activities totaling 556 million yuan to establish the Qingdao Tongge Phase I Venture Capital Fund to make equity or quasi-equity investments in unlisted startups in advanced manufacturing, semiconductors, intelligent connected vehicles, and augmented reality/virtual reality.

At present, the fund has invested in 8 projects, most of which are related to chips and semiconductors, including star projects such as this year's newest unicorn — the Universal Intelligent Computing Chip — this core technology.

Semiconductor investors said above that direct investment by large manufacturers generally revolves around expanding their own business, and most of the focus is on special chips closely related to their own business, such as AI chips, server chips, and video processing chips. By making an LP to lay out investments in chips and semiconductors, it is possible to dabble in more segments.

He also mentioned that the semiconductor circuit is a small circle. Basically, employees all intersect, and vertical institutions that have accumulated networking resources are relatively more professional and easier to get a share than major Internet companies.

In the last “Golden Decade,” Dachang made great strides in the Internet industry through investment. When the track changes, the reporter will continue to pay attention to what kind of new stories Dachang CVCs can create.

Editor/Jeffrey