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It's US vs. China in race to build chip technology of tomorrow
By James Thorne
May 4, 2021
President Joe Biden has proposed that the US invest $50 billion in semiconductor manufacturing and research.
(Doug Mills/Getty Images)
Even as the world's leading chipmakers scramble to solve critical supply bottlenecks, a new wave of semiconductor startups has been quietly lining up massive sums of venture capital in their quest to design the next generation of chips.
Startups in China and the US have been subject to a venture capital land grab from investors who believe nascent chip designs will propel a future ruled by artificial intelligence and machine learning.
Global VC investment in semiconductor companies set a quarterly record for deal value at $2.64 billion in the first three months of 2021, with 70% of the funding going toward Chinese companies, according to PitchBook data.
American companies have also raised impressive sums. In April, SambaNova Systemsbecame the most valuable VC-backed chipmaker in the US after raising $676 million at a $5 billion-plus valuation. And Groq landed a $300 million round co-led by Tiger Global and D1 Capital that will support the development of its streamlined AI chips.
Blank-check companies in the US have also been targeting privately-held chipmakers. Achronix Semiconductor was valued at $2.1 billion in a recent deal, and Israeli startup Valens is reportedly in talks to go public through a US-based SPAC.
The acceleration in startup funding is a sharp contrast to the chip shortages that have impeded the production of everything from new cars to PlayStation consoles. But the timing of the two phenomena appears to be coincidental.
The dealmaking is primarily driven by an understanding that the technologies of tomorrow will need increasingly specialized chips to run AI and machine learning tasks efficiently, said Brendan Burke, an emerging tech analyst at PitchBook.
But as the industry's largest players focus on production constraints rather than innovation, an opportunity has opened up for newcomers.
"Startups can try to surpass the designs of some of the largest chipmakers while [the incumbents] are just trying to maintain their market share," Burke said.
In China, the increase in chip investment underscores the priority the government has placed on strengthening its chip industry. In recent years, China has launched semiconductor-focused funds reportedly totaling around $50 billion. The investment is part of the country's long-term ambitions to become a leader in high-tech manufacturing and to reduce its dependence on foreign imports.
President Joe Biden's infrastructure proposal, The American Jobs Plan, would allocate $50 billion in new spending to the US semiconductor industry. The funds are part of a technology investment plan that aims to compete with the aggressive R&D spending that has gone on in China in recent years.
Some of the most active investors in VC-backed semiconductor companies have ties to the Chinese government, including Shenzhen Capital Group and CAS Investment Management, according to PitchBook data.
Beijing-based Horizon Robotics has gone on a fundraising tear, reportedly hauling in $750 million across two rounds earlier this year. Horizon makes chips for both fully and semi-autonomous vehicles, and it has struck partnerships with auto manufacturers including Audi, BYD and Continental.
Other Chinese semiconductor startups to raise mega-rounds in recent months reportedly include Enflame—which took in nearly $279 million from investors like Tencent—as well as Ecarx and Iluvatar CoreX.
To date, AI applications have mainly been run off of existing GPUs, Burke said. But the industry is being driven to create new and better chips that are customized to the needs of intelligent machines.
For example, Groq's tensor streaming processors are designed to drive down computing costs for artificial intelligence and machine learning computations. The company was founded by Jonathan Ross, who previously helped develop Google's tensor-processing unit, a chip designed for the search giant's machine learning needs.
Austin-based startup Ambiq is focusing on building chips that, among other uses, can help internet-of-things devices run on battery power. The startup raised $127 million in March, according to a regulatory document.
While startups invest in new chip designs, established companies in China and the US have also been investing in new semiconductor fabrication plants.
Semiconductor Manufacturing International, China's leading chipmaker, is reportedly building a $2.35 billion plant with backing from the city of Shenzhen.
TSMC, Intel and Samsung intend to spend tens of billions of dollars on new fabs in the US, with much of the activity concentrated in Arizona, according to various reports.
pitchbook.com
By James Thorne
May 4, 2021
President Joe Biden has proposed that the US invest $50 billion in semiconductor manufacturing and research.
(Doug Mills/Getty Images)
Even as the world's leading chipmakers scramble to solve critical supply bottlenecks, a new wave of semiconductor startups has been quietly lining up massive sums of venture capital in their quest to design the next generation of chips.
Startups in China and the US have been subject to a venture capital land grab from investors who believe nascent chip designs will propel a future ruled by artificial intelligence and machine learning.
Global VC investment in semiconductor companies set a quarterly record for deal value at $2.64 billion in the first three months of 2021, with 70% of the funding going toward Chinese companies, according to PitchBook data.
American companies have also raised impressive sums. In April, SambaNova Systemsbecame the most valuable VC-backed chipmaker in the US after raising $676 million at a $5 billion-plus valuation. And Groq landed a $300 million round co-led by Tiger Global and D1 Capital that will support the development of its streamlined AI chips.
Blank-check companies in the US have also been targeting privately-held chipmakers. Achronix Semiconductor was valued at $2.1 billion in a recent deal, and Israeli startup Valens is reportedly in talks to go public through a US-based SPAC.
The acceleration in startup funding is a sharp contrast to the chip shortages that have impeded the production of everything from new cars to PlayStation consoles. But the timing of the two phenomena appears to be coincidental.
The dealmaking is primarily driven by an understanding that the technologies of tomorrow will need increasingly specialized chips to run AI and machine learning tasks efficiently, said Brendan Burke, an emerging tech analyst at PitchBook.
But as the industry's largest players focus on production constraints rather than innovation, an opportunity has opened up for newcomers.
"Startups can try to surpass the designs of some of the largest chipmakers while [the incumbents] are just trying to maintain their market share," Burke said.
In China, the increase in chip investment underscores the priority the government has placed on strengthening its chip industry. In recent years, China has launched semiconductor-focused funds reportedly totaling around $50 billion. The investment is part of the country's long-term ambitions to become a leader in high-tech manufacturing and to reduce its dependence on foreign imports.
President Joe Biden's infrastructure proposal, The American Jobs Plan, would allocate $50 billion in new spending to the US semiconductor industry. The funds are part of a technology investment plan that aims to compete with the aggressive R&D spending that has gone on in China in recent years.
Some of the most active investors in VC-backed semiconductor companies have ties to the Chinese government, including Shenzhen Capital Group and CAS Investment Management, according to PitchBook data.
Beijing-based Horizon Robotics has gone on a fundraising tear, reportedly hauling in $750 million across two rounds earlier this year. Horizon makes chips for both fully and semi-autonomous vehicles, and it has struck partnerships with auto manufacturers including Audi, BYD and Continental.
Other Chinese semiconductor startups to raise mega-rounds in recent months reportedly include Enflame—which took in nearly $279 million from investors like Tencent—as well as Ecarx and Iluvatar CoreX.
To date, AI applications have mainly been run off of existing GPUs, Burke said. But the industry is being driven to create new and better chips that are customized to the needs of intelligent machines.
For example, Groq's tensor streaming processors are designed to drive down computing costs for artificial intelligence and machine learning computations. The company was founded by Jonathan Ross, who previously helped develop Google's tensor-processing unit, a chip designed for the search giant's machine learning needs.
Austin-based startup Ambiq is focusing on building chips that, among other uses, can help internet-of-things devices run on battery power. The startup raised $127 million in March, according to a regulatory document.
While startups invest in new chip designs, established companies in China and the US have also been investing in new semiconductor fabrication plants.
Semiconductor Manufacturing International, China's leading chipmaker, is reportedly building a $2.35 billion plant with backing from the city of Shenzhen.
TSMC, Intel and Samsung intend to spend tens of billions of dollars on new fabs in the US, with much of the activity concentrated in Arizona, according to various reports.
It's US vs. China in race to build chip technology of tomorrow | PitchBook
Even as the world’s leading chipmakers scramble to solve critical supply bottlenecks, a new wave of semiconductor startups has been quietly lining up massive sums of venture capital.
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