Nowadays, everyone invests in semiconductors

The 14th China Fund Partner Summit, hosted by Zero2IPO Group and the investment community, was grandly held in Shanghai on August 12-13, 2020. The event brought together more than 150 LPs and trillions of investable capital from well-known domestic FOFs, government-guided funds, sovereign wealth funds, family funds, insurance institutions, bank capital, VC/PE institutions, and listed companies to explore the path of equity investment under the new economy.

In the seventh special session in the afternoon, Zhou Kaibing, Chairman and General Manager of Hangzhou High-tech Investment Co., Ltd., Chen Liguang, Founder, CEO and Managing Partner of Oceansong Capital, Huang Jinping, Founding Partner and Chairman of Rongyi Investment, Kong Lingguo, Founding and Managing Partner of Heli Capital, Tu Hongchuan, Founding Partner of Boiling Point Capital, Yang Yancheng, Managing Director of Orient Securities Capital, Zhang Peng, Managing Director of Northern Light Venture Capital, and Zhang Xiaojuan, Vice President of Beijing High-end Industry Development Fund, had a multi-level and multi-dimensional discussion on "The trend of technology investment during the market adjustment period."

The following is a transcript of the conversation, edited by the investment community:

Zhou Kaibing: Good afternoon, distinguished guests! I am honored to share with you the trend of technology investment during the market adjustment period. Let's hear the views of the investment leaders on technology investment. Let's ask them to introduce themselves first.

Chen Liguang: Thank you, Mr. Zhou. I am Chen Liguang from Oceanpine Capital. Oceanpine Capital is a PE fund that has been established for about three years and is deeply engaged in hard-core technology investment, focusing mainly on TMT and medical tracks. The TMT field mainly focuses on semiconductors, chips, 5G, network security, enterprise services, etc., and the medical field mainly focuses on new drug research and development and innovative medical devices. We invested 200 million US dollars in the first half of the year due to the epidemic, and we expect to invest another 200 million US dollars in high-quality hard technology projects in the second half of the year.

Huang Jinping: Good afternoon, friends. I am Huang Jinping from Rongyi Investment. All 30 people in our team have a background in science and engineering, and 14 of them have worked in Huawei and ZTE for more than 15 years. Therefore, we have a deep understanding of the technology industry. We will use the resources we have accumulated to deploy upstream chip devices and downstream industry applications, and integrate related resources such as smartphones and automotive electronics to help the invested companies develop better.

Kong Lingguo: Hello everyone, I am Kong Lingguo, the founding managing partner of Heli Capital. I am from Taiwan, China, and have been investing in semiconductors in China for nearly 20 years, focusing on the application of semiconductor technology in AI, smart hardware, 5G, and new energy vehicles. Our team has rich resources in IC design, design services, and wafer manufacturing, including Taiwan’s own industrial chain advantages and our connections and resources on both sides of the Taiwan Strait, which can help semiconductor startups increase the added value of the supply chain.

Tu Hongchuan: Hello everyone, I am Tu Hongchuan, the founding partner of Boiling Point Capital. I entered the VC high-tech field in April 1995, and have worked in Tokyo, Silicon Valley, Boston, Shanghai, and Beijing. My 25 years of investment achievements include Qihoo 360, Liujianfang, Tuniu.com, Netcom Technology, and Qi'anxin, which just went public on the Science and Technology Innovation Board some time ago.

Boiling Point Capital manages a RMB and USD dual-currency fund of RMB 3 billion. The partners have a combined experience of 55 years in venture capital, with cumulative investments exceeding RMB 4 billion and historical fund returns exceeding RMB 10 billion. They focus on early-stage technology projects such as medical robots, network security, intelligent manufacturing, and industry + Internet.

Yang Yancheng: Hello everyone, I am Yang Yancheng from Orient Securities Capital. We are a platform under Orient Securities that focuses on equity investment. In addition to PE investment, we also do domestic and overseas mergers and acquisitions transactions.

Zhang Peng: Hello everyone, I am Zhang Peng from Northern Light Venture Capital. Northern Light Venture Capital was founded in 2005. It has five US dollar funds and three RMB funds, managing more than 30 billion RMB in assets. Its investments focus on early-stage technology, including chips, underlying storage, security, middleware, enterprise software, data, as well as robots, new materials and other technology fields.

Zhang Xiaojuan: Hello everyone, I am Zhang Xiaojuan from Beijing High-tech Industry Development Fund. We are a government-guided fund established in 2015 in the parent-child fund model. In the five years since its establishment, we have cooperated with more than 20 sub-funds and invested more than 6 billion in more than 100 upper molds, mainly investing in new generation technology and industrial projects, including health diagnosis and treatment, smart cars, high-end equipment, new materials and other mid- and late-stage projects.

“It seems that there is no GP that does not invest in semiconductors now”

Zhou Kaibing: Just now, seven guests introduced themselves and their institutions. Technology investment has gradually become an important direction for the development of the industry. Let's start with Mr. Chen, and talk about your investment in biology, innovative drugs, and equipment. Can our country use the power of traditional state-owned enterprises to solve the development of biomedicine, artificial intelligence, and chips?

Chen Liguang: Thank you, Mr. Zhou. China's technological innovation is in the ascendant, and the pace of new economic investment is almost synchronized with Silicon Valley. The Internet investment 1.0 era was in the United States around the 1990s, when China gave birth to Internet companies such as Baidu and Alibaba.

The Internet investment 2.0 era was from around 2000 to around 2015. At that time, domestic companies with innovative business models driven by e-commerce emerged, including 58.com. In the United States, companies such as Palo Alto Networks and Fortinet were born around 2015. However, domestic Internet investment 2.0 still mainly revolved around the innovative development of Internet business models such as the sharing economy.

Everyone realizes that China's economy has entered a new normal of economic development. We started investing in technology and basic industries in 2017 and found that China has a huge market for both TMT and innovative biopharmaceuticals, plus a good exit mechanism (the registration system of the Science and Technology Innovation Board and the Growth Enterprise Market). I call the Internet new economy investment from 2017 to the present the 3.0 era. Several institutions on the panel just now invested in hard-core technology, and Oceansong Capital has also done a lot of in-depth research and sorting around the TMT and medical fields. I will share more details later.

Zhou Kaibing: Mr. Huang moved from the business sector to the industrial sector and has a deeper understanding of technology investment.

Huang Jinping: Defining certainty in uncertainty requires consideration from many aspects. Monopoly companies such as Alibaba, Tencent, and Moutai are certain, but have passed the venture capital stage. Therefore, technology needs to be understood from a technical perspective.

We can predict technological innovation from the future. When the technology is mature and commercialized, we can measure the market demand, value and competitive landscape of this technology. This is to understand the future value of the technology in the market and find certainty in uncertainty through technological monopoly.

Zhou Kaibing: Mr. Huang looks for reliable entrepreneurs from predictable technology paths. Mr. Kong has invested in semiconductors for more than 20 years. Can you share your experience?

Kong Lingguo: Venture capital has four factors: talent, capital, market, and technology. Technology is an important part of the venture capital circle, covering areas ranging from software to the Internet, communications, and semiconductors, but the subdivisions of technology are very different.

The semiconductor field I focus on is completely different from the Internet or consumption. The division of labor in the semiconductor industry chain is mature. For example, TSMC accounts for more than 50% of the entire semiconductor foundry. No matter how strong a chip design company's design capabilities are, without TSMC to produce for it, its design is zero. Therefore, TSMC affects the development direction of the entire semiconductor industry. This is the difference between high-tech and subdivided industries.

Five years ago, the number of GPs investing in semiconductors could be counted on one hand, but now it seems that there is no GP that does not invest in semiconductors. This shot in the arm has greatly promoted the development of the domestic semiconductor industry, and the cooperation between investors and enterprises directly affects the direction of domestic semiconductors.

Zhou Kaibing: Mr. Kong just said that our semiconductor industry is a huge group. There are some different investment schools on the East Coast and West Coast of the United States. You have been back to China for many years. Can you talk about the understanding of technology investment in China and the United States?

Tu Hongchuan: I worked in Silicon Valley and Boston for 15 years. In 1996 and 1997, I visited a company called Shenzhen Liming Network in Shenzhen. This company was the first to digitize the paper transactions of the Shanghai Stock Exchange. Despite this, the technological gap between China and the United States was still more than 12 years.