China VC: US Policy Uncertainty Provides Window For China To Advance In Semiconductors

Chinese semiconductor companies is at a golden age in developing their capabilities, as policy uncertainty from the US provides stimulus for China to build its own semiconductor industry yet still leaves space for companies in China to access the global semiconductor supply chain, said Duane Kuang, Managing Director of Qiming Venture Partners, a Shanghai-based venture capital firm.

The end users of chips in China are willing to try to use domestically made chips, and the capital support is there. And the same time, the United States has not completely blocked China from the global semiconductor industrial chain, and the chips that can be used can still be bought by Chinese companies.

At the same time, China’s capital market, especially the Science and Technology Innovation Board, is very friendly to semiconductor companies, affording them with high valuations. All these create the best environment to entrepreneurs, venture capitalists, and industry players to advance China’s semiconductor space.

The demand for the semiconductor industry is particularly strong at present, and it is the best time to start a business in China’s semiconductor industry, Kuang said.

There is still a lot of uncertainty in Sino-US bilateral relations, which may ultimately cause the United States to further restrict the development of China’s semiconductors industry. But at least now, the United States has not yet fully blocked the whole Chinese semiconductor sector, and many Chinese companies can still use American chips and American chip technology.

Chinese chip design companies can still use the world’s most popular design tools, and Chinese smartphone makers and other chip end users can still buy American chips.

But the uncertainty of where US policy might go in the future has caused many chip end users in China to worry about reliability of their supplies, and they have a very strong willingness to try domestic chips, which provides opportunities for the whole industry to gradually learn and advance, said Kuang. Previously, the willingness of Chinese firms to use domestically made chips was very weak.

However, once there is no uncertainty, the semiconductor industry in China will face great difficulty. So when uncertainty disappears, opportunities will disappear. If there is complete restriction on China, it will undoubtedly be a disaster because China’s semiconductor industry is not yet self-sufficient. If China and the United States really decouples, China’s semiconductor industry will enter its darkest day.

China is now in a rare window of opportunity due to policy vagueness on the part of the US, and semiconductor companies must use this period to hurry up in strengthening their capabilities.

More broadly, Kuang believes today’s technology investment in China provides great opportunities because 1) China’s market demand is large enough; 2) The decision-making power is transferred to China. 3) Geopolitics has given everyone a window period, an the next few years is critical; 4) The reserve and development of talents are fully ready; 5) Sufficient funds are invested in innovation; 6) Multi-level capital markets can further promote innovation and create an environment that encourages innovation.

Various industries in China offers investors unparalleled opportunities, including huge software industry in the process of digitization, healthcare, enterprise services, education, and consumer tech.

Qiming Venture Capital was established in 2006 and has set up offices in Shanghai, Beijing, Suzhou, Shenzhen, Hong Kong, Seattle, Boston and the San Francisco Bay Area.

At present, Qiming Venture Capital manages nine US dollar funds and six RMB funds, with total assets under management of US$5.9 billion. Since its establishment, it has focused on investing in outstanding enterprises in the early and growth stages of the industries such as TMT and Healthcare.

Up to now, Qiming Venture Capital has invested in more than 380 fast-growing innovative companies, of which more than 130 are traded on the New York Stock Exchange, Nasdaq, Hong Kong Stock Exchange, Taiwan OTC, Shanghai Stock Exchange and Shenzhen Stock Exchange, including Xiaomi, Meituan, Bilibili, Ganli Pharmaceutical, Tigermed, and Zai Lab.