How to break through the fierce competition in the chip design industry in the Greater Bay Area during the boom period

The past decade has been a decade of explosive growth for the chip design industry in the Guangdong-Hong Kong-Macao Greater Bay Area. The industry explosion is attracting venture capital institutions and private equity investment institutions to enter, and a group of high-growth "gazelles" and "unicorns" have been nurtured with trillions of dollars of funds. Against this background, what is the current direction of the chip design industry in the Greater Bay Area? How to break through technical barriers and market barriers? How to gradually expand the market share of domestic chips? How to achieve talent accumulation?

The past decade has seen an explosive growth in the chip design industry in the Guangdong-Hong Kong-Macao Greater Bay Area.

According to statistics from the China Semiconductor Industry Association, in 2010, the domestic chip design industry had sales of approximately 55 billion yuan; by 2020, sales reached 381.94 billion yuan, an increase of nearly 600% in 10 years, showing an explosive growth trend. The development trend of the Greater Bay Area is consistent with the national trend. According to statistics from the Integrated Circuit Design Branch of the China Semiconductor Industry Association, of the 381.94 billion yuan in sales of the entire chip design industry in 2020, sales in the Yangtze River Delta amounted to 159.97 billion yuan, accounting for 39%, and sales in the Pearl River Delta amounted to 148.46 billion yuan, accounting for 37%.

As one of the important strategic emerging industries in the Guangdong-Hong Kong-Macao Greater Bay Area, the semiconductor chip industry is attracting many entrepreneurs and gathering a lot of capital to invest in it. In the entire semiconductor industry, design, packaging and testing, and manufacturing account for 42.87%, 29.69%, and 27.44% respectively. Chip design is the largest link in the Greater Bay Area's integrated circuit industry chain in terms of sales, and its growth rate is explosive.

According to statistics from the Integrated Circuit Design Branch of the China Semiconductor Industry Association, by the end of 2020, there were 2,218 chip design companies in China, most of which were concentrated in the Pearl River Delta, the Yangtze River Delta, and the Beijing-Tianjin-Hebei region. The chip design industry is experiencing an entrepreneurial "explosion."

Feng Jie, chairman of Shenzhen Lihe Science and Technology Venture Capital Co., Ltd., an investment institution, believes that China's chip design industry is in a period of explosive growth and is currently facing a "historic development opportunity."

The explosion of entrepreneurship is attracting venture capital and private equity investment institutions to influx, nurturing a group of high-growth "gazelles" and "unicorns" with trillions of dollars of funds. Shenzhen Stock Exchange, Shanghai Stock Exchange and Hong Kong Stock Exchange have all listed companies related to the chip industry chain, which has led to the capital in the public market being mainly concentrated in leading companies.

What specific directions is the current chip design in the Greater Bay Area committed to? How should we break through technical barriers and market barriers? How to gradually expand the market share of domestic chips? How to achieve talent accumulation? In response to many topics in the chip design industry, Southern Finance Omnimedia reporters recently visited some entrepreneurs and investors in the chip design industry.

Faced with such industry opportunities, Bai Songrong, co-founder and CTO of chip design startup Shenzhen Xihua Technology Co., Ltd., and Feng Bingjun, founder and chairman of Hangzhou Ruimeng Technology Co., Ltd., both believe that practitioners in the Greater Bay Area and even in China should have the courage to plunge into the unknown "blue ocean" market, focus on technology accumulation and capital accumulation, and strengthen close linkage with all aspects of domestic manufacturing.

The head of Shenzhen Capital Investment Group, an investment institution, believes that in the face of opportunities, financial institutions should help truly high-quality entrepreneurs in the chip design industry to expand as quickly as possible, and encourage the industry to produce more gazelle companies, leading companies, and even giant companies.

The historical opportunity of "China Chip"

In the office of Shenzhen Tanglang Xihua Technology Co., Ltd., Bai Songrong held a chip the size of a grain of rice on his fingertips and told reporters that the interior of this micro device is "like a skyscraper with a complex structure." He said that tiny transistors are arranged in the "grain of rice" and form signals in the process of transmitting current.

"This is a SAR (Specific Absorption Rate) chip, which can monitor the electromagnetic radiation energy value of a mobile phone per unit time," said Bai Songrong.

Bai Songrong is the Chief Technology Officer and co-founder of Xihua Technology. Before co-founding Xihua Technology in 2018, Bai Songrong had professional experience in major chip manufacturers both abroad and domestically.

The current entrepreneurial explosion in the domestic chip design industry mainly comes from three forces, including entrepreneurship by university researchers, entrepreneurship by technical teams from leading domestic companies, and entrepreneurship by senior executives from "big companies". Bai Songrong belongs to the third type.

He told the Southern Finance Omnimedia reporter that Xihua Technology was founded "in response to the chip demand for the 5G era and smart cars." The company is currently focusing on the research and development and design of chips for 5G and autonomous driving.

Bai Songrong pointed out to reporters that chip design starts with conception and definition. When new market demands arise, the inherent general-purpose chips in the market cannot provide corresponding functions, which provides opportunities for customized chip design.

In fact, entering the customized market is a path for chip designers in the Guangdong-Hong Kong-Macao Greater Bay Area and even related manufacturers across China to break down the original market barriers and technological barriers and open up commercialization.

Shenzhen Huaqiang North is known as "Asia's No. 1 Electronic Trading Market". Here we can see that the existing general-purpose chip market has formed a pattern of oligopoly by international "big manufacturers". The reporter visited the New Asia Electronics Mall and found that many integrated circuit sales merchants still mainly operate brands from the United States, Europe, Japan, South Korea, and Singapore, including ATMEL, Analog Devices, Fujitsu, Intel, ITT, Lattice, Samsung, Infineon, Texas Instruments, etc. Merchants in Huaqiang North skillfully introduce their products using English names or abbreviations.

According to data from the China Semiconductor Industry Association, China's chip design accounted for about 13% of the global market share in 2020. According to data from the U.S. Semiconductor Industry Association, the United States accounted for as much as 65% of the global chip design market.

Yu Hao, an internationally renowned high-performance chip design expert, explained to reporters that existing international giants have been ahead in software and architecture research and development for decades, and in market development for decades, which has given them the opportunity to build thick and high "barriers" in the existing market structure.

This has historical factors. After all, the chip industry was born in Silicon Valley in the United States in the 1950s.

Zhang Chi, partner and fund director of Lihe Science and Technology Venture Capital, told reporters: "The research and development of early electronic products was in the hands of foreign companies, and not many people were willing to try domestic chips. The promotion cost of domestic chips is extremely high."

Chip industry "a single tree cannot make a forest". Bai Songrong and Zhang Chi both said that it is the comprehensive development of "Made in China" that has provided sufficient downstream market space for domestic chip design entrepreneurs.

Zhang Chi said frankly: "We are facing a historic opportunity for a new round of chip industry explosion. The comprehensive maturity of the manufacturing industry provides a great entrepreneurial environment."

Feng Jie, chairman of Leaguer Science and Technology Venture Capital, pointed out: "At present, major global economic participants have realized that the key to economic competition lies in technological competition. Especially in the field of chips, China is facing a development opportunity."

In Zhang Chi's view, the Guangdong-Hong Kong-Macao Greater Bay Area is the production site of many terminal devices equipped with chips, such as white goods, mobile phones, automobiles, medical equipment, communications, etc. The world's most important chip consumer market is in China, in the Guangdong-Hong Kong-Macao Greater Bay Area.

At present, smart cars have been regarded by the semiconductor industry as another "platform" market with huge potential after smartphones. The market demand for "human-computer interaction" technologies such as touch screens, fingerprint recognition, voice control, and machine vision has emerged around multiple aspects such as autonomous driving and in-car space experience, and the automotive chip market has exploded. Bai Songrong pointed out to reporters that Xihua Technology will focus on business opportunities in the smart car industry, including automated driving research, and carry out automotive-grade MCU chip design and development. "The first choice for cooperation will be domestic car brands." Bai Songrong said.

Breakout: The "Blue Ocean" strategy provides a path to breakthrough

Ruimeng Technology, which was established 12 years ago, has witnessed the process of "localization" in recent years.