VCs are optimistic about IC design, saying that early stage investment is the most lacking

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VCs are optimistic about IC design, saying that early stage investment is the most lacking [Copy link]

my country's IC design industry has been the focus of venture capital (VC) in the past two or three years. In particular, the successful listing of Vimicro and Actions Semiconductor last year has further inspired the enthusiasm and confidence of venture capital. Many professionals in the industry predict that there will be a VC investment boom in the IC design field.

　　Helping IC designers in times of need

　　Li Ke, director of the Information Department of the China Semiconductor Industry Association, said that in 2005, the sales revenue of the domestic IC design industry increased by 52.5% year-on-year, and the scale exceeded 10 billion yuan for the first time, reaching 12.43 billion yuan. According to the latest statistics, there are currently 479 officially registered IC design companies in mainland my country, in addition to many returnees who have returned to China to start businesses. Most of these design companies and teams are in the start-up stage, and lack of funds is a common problem they face.

　　Wang Qi, an analyst at Zhongguancun Securities, believes that the vast majority of design companies are small and medium-sized enterprises. Due to their unique innovation and marketability as well as the resulting risks, it is difficult for these companies to adopt traditional financing models such as bank loans and issuance of stocks or bonds. The need for innovative financing models such as venture capital is very urgent.

　　The Pearl River Delta accounts for one-third of the country's design industry. Yu Zhonghou, president of the Guangdong Semiconductor Industry Association, said in an interview with a reporter from China Electronics News that the Pearl River Delta's developed electronic complete machine manufacturing industry has created a huge IC market and has greatly driven the development of the IC design industry. At present, the Pearl River Delta's demand for ICs accounts for about 70% of mainland China. There are more than 180 design companies in Guangdong and Shenzhen. These companies are either design companies that focus on the products of complete machine enterprises or their extensions; or small and medium-sized design companies that focus on market demand and have independent design capabilities to engage in short-term and fast-paced projects. He believes that the Pearl River Delta has established the necessary channels and platforms for IC design, IP library, system services, testing, identification and analysis.

　　He Tao, deputy secretary general of the Guangdong Semiconductor Industry Association, said that most of Shenzhen's design companies were established after 2001, mainly small and medium-sized companies. After several years of accumulation and training, these companies have certain design and product development capabilities, but the company's product volume and further development require financial support. He Tao said that after extensive research and understanding of the actual needs of enterprises, it was determined that investment and financing in the IC field would be the theme of the "Third Pan-Pearl River Delta Semiconductor Industry Summit Forum " held on May 24 , focusing on building investment and financing, venture capital, risk investment and domestic and foreign technology and market exchange platforms required by enterprises in the current semiconductor industry.

　　The situation in Guangzhou is similar to that in Shenzhen. Fan Xiaohong, director of the Industrial Development Division of the Guangzhou Information Office, said that according to the city's positioning of serving surrounding industries and surrounding industries with high added value, Guangzhou focuses on developing the software and integrated circuit industries. Currently, there are more than 20 design companies in Guangzhou, most of which were founded by overseas returnees after 2001 and are in great need of financial support. At present, the Guangzhou government is actively working on introducing venture capital. He believes that there is a lot of room for industry associations to play a role in how to better combine venture capital with design companies.

　　VCs are optimistic about IC design

　　Generally speaking, there are three financing channels for domestic IC design companies: government support funds, listing and venture capital. Among them, the amount of government support funds is limited, and listing is not a smooth road for general companies. Therefore, seeking venture capital has become an inevitable choice for most IC design companies.

　　　 Wang Qi believes that the successful listing of Vimicro and Zhuhai Actions in 2005 will greatly increase the confidence of venture capital in the domestic IC design industry, and the financing difficulties of the IC design industry will be alleviated to a certain extent. In particular, Vimicro's financing experience is more representative. When the company was established, it received support from venture capital including the Ministry of Information Industry's venture capital funds. With its successful listing, various venture capitals have achieved a perfect exit path.

　　He Tao believes that venture capital is highly efficient and has a relatively simple work process, which is most suitable for the needs of IC design companies. He said that from the second half of this year to the next three years, there will be a climax in IC design investment, and there may be an investment boom like the Internet in the past .

　　Wang Baoqiang, investment manager of Times Venture Capital, said in an interview with China Electronics News that IC design has been a hot spot for venture capital since 2003. When asked whether venture capital can form a boom in the field of IC design, he believes that there is hope. He analyzed that, unlike the Internet, IC design is a real product with great inherent value and high technical difficulty. Although there are many IC design companies in China, there are not many successful cases compared with this.

　　He analyzed that whether China's IC design industry has really become stronger in the past two years depends on the overall operational capabilities of the companies and whether they can make breakthroughs in global competitiveness under the global competition environment. He also said that in the past five or six years, the development speed of China's IC design industry is rare in other parts of the world. Considering the growing demand of China's IC market and the increasing support of national policies, the development of IC design industry is promising. In the next two to three years, more and more venture capital will be invested in China's IC design industry.

　　Lack of initial investment

　　Currently, there are more than 30 fund companies active in China's semiconductor industry, including Goldman Sachs, H&M, Walden, Warburg Pincus, Carlyle, Intel , etc. The investment characteristics of these funds are concentrated in the mid-term and late-stage of design companies, and there are very few that focus on early-stage investment projects in China.

　　Generally speaking, venture capital mainly considers the following factors when choosing a design company: first, the ability of the company team, successful work experience, relevant product development, and successful market launch; second, the company's ability to actually advance, achieve as planned, and industrialize, not just the business plan. If it is an overseas investment fund, it also depends on the company's sales. For a design company in the start-up stage, it is difficult to have real sales within two to three years. This period is precisely the most critical period for the company's development and it is also the most in need of financial support.

　　Industry experts have pointed out that since there are not many IC design companies that have established themselves in the market and have large enough sales, they have become the target of VC competition. As a result, there are many people competing for good projects, which drives up the prices; while some cases that are in urgent need of investment are obviously ignored by venture capital because of unclear market prospects and business models.

　　Wang Baoqiang said that the lack of early venture capital support is a serious problem facing the current development of the design industry. Because without early investment support, the probability of success of design companies will be greatly reduced, not only will venture capital have less room for choice and fewer opportunities in the middle and late stages, but it will also have an impact on the future of the entire design industry and even the IC industry. He believes that early investment in the design industry especially needs the support of government industrial funds. Many industry insiders have also called for more efforts from government departments in this regard, as there is a lack of far-sighted, strategic, and unconcerned industrial funds in China.

　　Li Ke believes that it is not easy to attract large foreign consortiums and funds for early-stage investment in my country's IC design industry, but some professional and technological venture capitals should have a vision for discovery and pay more attention to early-stage projects. We are currently seeing some good signs, and some funds are gradually trying seed projects in the semiconductor industry.

　　China's large number of chip design companies have become the focus of many venture capitals, but to find gold mines among them requires discovery, confidence and patience.

　　Related links

　　Venture capital is the core of U.S. semiconductor industry investment

　　As the world's leading semiconductor company, the United States has a good semiconductor investment and financing platform. Semiconductors have always been regarded by the United States as the core pillar industry of high technology and the manufacturing industry with the highest added value. In 2004, the United States accounted for 47% of the global semiconductor market. There are 3,000 semiconductor companies in the United States, including design, manufacturing, packaging, IDM, equipment and services.

　　Many well-known semiconductor companies in the United States had venture capitalists involved during their founding, such as Intel, National Semiconductor, AMD, Broadcom, Qualcomm and the famous equipment company Applied Material, etc. According to statistics, there were 1,050 new listed companies in the United States from 1999 to 2003, of which 554 were supported by venture capital.

　　The United States also has a relatively complete financing system and financial instruments for semiconductor manufacturing companies. In addition to loans provided by general commercial banks, many investment banks and fund companies can provide short-term loans. Silicon Valley also has a bank specializing in industrial financing - Silicon Valley Bank, which has provided short-term industrial loans to nearly 10,000 technology startups.

　　Semiconductor companies using A-share financing

　　Due to the high risk and volatile performance of semiconductor companies, there are not many semiconductor companies listed on the A-share market, including Shanghai Belling, Hangzhou Silan, and Changdian Technology.

　　Shanghai Belling Co., Ltd.

　　The company's main business is the design, manufacture, sales and technical services of integrated circuits. The company was formerly known as Shanghai Belling Microelectronics Manufacturing Co., Ltd., and was listed on the Shanghai Stock Exchange on September 24, 1998. It issued 120 million shares at an issue price of RMB 6.530 per share, with a total market value of RMB 783.6 million and a net amount of RMB 767.59 million.

　　Hangzhou Silan Microelectronics Co., Ltd.

　　The company's main business is the development, production and sales of integrated circuit products for consumer complete machines such as CMOS, BiCMOS and bipolar. On March 11, 2003, the company was listed on the Shanghai Stock Exchange. It issued 26 million shares at an issue price of RMB 11.60 and actually raised RMB 286.9242 million.

　　Jiangsu Changdian Technology Co., Ltd.

　　The company's main business is integrated circuit packaging, testing and discrete device production and sales. On June 3, 2003, the company was listed on the Shanghai Stock Exchange, issuing 55 million shares at an issue price of RMB 7.190 per share, with a total market value of RMB 395.45 million and a net amount of RMB 377.8986 million.

(Editor: Yue Lixia)