The new wave of chip entrepreneurship is coming, but the science and technology innovation board is not a paradise for making wealth

The new wave of chip entrepreneurship is coming, but the science and technology innovation board is not a paradise for making wealth

A new wave of chip entrepreneurship has arrived!

According to the company’s data, as of the end of May 2021, there were 15,700 registered chip companies, a year-on-year increase of 230%. According to all statistics, there are 67,000 surviving companies in my country with the keyword “chip”. Based on this rough calculation, nearly a quarter of “chip” companies are now established in the first half of 2021.

This data is obtained by searching for the keyword “chip” in the description of the company name, main business, etc., and the data must be slightly biased. But another interesting phenomenon can also be used to verify the arrival of chip entrepreneurship, that is, it has become increasingly difficult for chip companies to name themselves in the past two years. Who would have thought that the combination of the broad and profound Chinese character “Core” would also be a day when the chip company named it and “Jiang Lang was exhausted”.

The international situation is turbulent, and the domestic chip entrepreneurship wave is surging. From the perspective of technology, industry and history, how can we clarify the significance of this wave of chip entrepreneurship, and how should we grasp the direction?

1. Policy gravitation has increased layer by layer, and there have been three chip entrepreneurship waves in 20 years

This is not the first wave of chip entrepreneurship in China. 

The origin of the integrated circuit industry dates back to 1958 and has experienced more than 60 years of development. China’s semiconductors lag behind half a century from research to large-scale marketization and industrialization. Starting from the “908” and “909” projects in the late 1990s, it has only a history of more than 20 years.

In the past 20 years, the ups and downs of the growth of China’s semiconductor industry have also created a number of heroes of the times. From the perspective of blowout entrepreneurship, in the past 20 years, there have been roughly three chip entrepreneurship surges in China . 

In the first wave, since 2000 , a paper document has contributed to the prosperity of the chip design industry today . This is the “Policies to Encourage the Development of the Software Industry and the Integrated Circuit Industry” (referred to as Document 18) . On the one hand, many foreign-funded semiconductor companies are attracted by the policy to establish factories in China; on the other hand, a group of outstanding overseas returnees have also embarked on the road of entrepreneurship back home. According to relevant reports at the time, as of 2004, among Chinese semiconductor design companies, the proportion of overseas students returning to start a business was no less than 30%. Shanghai has become the main battlefield for enthusiastic returnees. Companies such as Vimicro and Spreadtrum were founded during this period.

Immediately afterwards, since 2005, the domestic introduction of Silicon Valley’s venture capital concept has injected a shot in the domestic semiconductor industry, and more and more overseas returnees have returned to China. From 2005 to 2008, more than 80% of the hundreds of semiconductor startups in China were returned from overseas.

From 2008 to 2014, mainstream venture capital no longer paid attention to semiconductors, and enjoyed the Internet and business model innovation. The chip entrepreneurship craze temporarily calmed down.

In the second wave, in 2014, the state once again increased its policy efforts and established a large fund, and social capital also turned to focus on the semiconductor field. The establishment of the big fund has an indelible effect on the development of China’s chip industry. On the one hand, large funds have not only promoted the capital market’s attention to the chip industry, on the other hand, large funds have effectively narrowed the growth gap between domestic chip design and chip manufacturing.

In the direction of entrepreneurship, it coincides with the rise of the artificial intelligence technology wave, and the demand for computing power has soared. Since 2014, many artificial intelligence chip start-up companies have been established at home and abroad, of course, mainly chip design companies. These start-up companies were also enthusiastically favored by capital at one time. In the past two years, with the entry of large companies and the downstream application market has not yet opened, this wave of artificial intelligence chip design companies has grown less and most of them are weak. Among the entrepreneurs, there are still many returnee technical experts, and there are also “disciples” of the previous wave of returnee experts.

In the third wave, starting in 2019, the emergence of the science and technology innovation board has once again invigorated chip entrepreneurship. Before the sci-tech innovation board, there were very few listed companies in the chip field, and larger companies were struggling to line up on the GEM. Looking up to the rapid expansion of Internet companies such as BAT, which were born in almost the same period. At the same time, affected by the trade friction between China and the United States, the Chinese people began to realize the pain of the chip card neck, and the nationwide “core” acid brought another wave of entrepreneurship in the chip industry.

Beginning in 2019, the wave of Chinese chip entrepreneurship began to shift to the upstream of chips, equipment, materials, and many startup companies were born in the fields of GPU, EDA, and autonomous driving chips. For example, there are 40 domestic companies involved in the key EDA field. 

From a vertical perspective, China’s semiconductor industry has experienced three entrepreneurial climaxes and has undergone a transformation from the downstream to the upstream. These three entrepreneurial climaxes have gradually made up for the shortcomings of the development of my country’s semiconductor industry. These start-up companies are like waves of waves, under the gravitational force of waves of policies, pushing China’s chip semiconductor industry forward.

2. Chip entrepreneurship is surging, and three types of companies are competing for success

In the ten years before 2011, the number of chip companies registered increased year by year, but the growth was relatively stable. In 2011, 1,180 chip companies were registered. Entering 2020, the number of registrations of domestic chip companies has shown a blowout growth, reaching 21,700, a year-on-year increase of 216%.

This year’s data is even more shocking! Entering 2021, as of the end of May, there were 15,700 registered chip companies across the country, a year-on-year increase of 230%. The wave of domestic chip entrepreneurship continues to roll in. Among the 15,700 companies that have soared, most companies still use chip design, which is also in line with the matching law of the chip industry chain.

We found that, from the perspective of models, the companies in this wave of entrepreneurship can be roughly divided into the following three categories:

In the first category, a certain business line or subsidiary of a large company is independent. Generally speaking, such independent operation, the shareholding structure is basically unchanged, mainly due to the independence of operation and management. The advantage is that independently operated subsidiaries no longer rely on their affiliated companies to carry out their business, face market competition directly, and gain higher market recognition. At the same time, after the spin-off, the subsidiary’s price-earnings ratio will be estimated by the chip company, and it will also get a higher valuation. With the sci-tech innovation board to give chip companies a window period to moderately relax the requirements, quickly land on the sci-tech innovation board to grow and develop. Recently, Xinsheng Technology, a wholly-owned subsidiary of China Mobile, announced its independent operation and officially entered the field of IoT chips. On June 30, BYD Semiconductor Co., Ltd. spun off from BYD formally submitted the IPO acceptance letter. Earlier, Xiaomi also split Songguo’s IoT chips to form Nanjing Dayu Semiconductor.

The second category is self-employed teams. With the prosperous development of downstream application markets such as 5G, Internet of Vehicles, Internet of Things, artificial intelligence and other downstream application markets, market demand has grown, and emerging technologies and chip technologies are merging forward and taking a customized development route. Software-defined chips have become an industry consensus. At the same time, in the face of opportunities for the development and growth of the domestic chip industry chain, many chip entrepreneurs have devoted themselves to the entrepreneurial boom, and AI chips, IoT chips, and autonomous driving chips are still hot.

In the third category, a small department or small team of a large international semiconductor company comes out to start a business as a whole, such as GPU, MCU and other fields. This type of endogenous entrepreneurial motivation is the same as the previous two types, but in terms of form, there are some tricks. Generally speaking, this kind of team has nothing to do with the original company’s equity, but the people are still the original people, but they have changed their flags.

These three types of companies are not good or bad, they are the backbone of the current wave of chip entrepreneurship. Favorable policy attention has brought about a boom in capital investment in semiconductors, and the two have brought a boom in chip entrepreneurship, followed by a boom in chip companies going public, and a tide of talent cultivation is also on the way. We predict that the domestic chip entrepreneurship wave is far from reaching its peak at this moment and will continue for a long time.

3. Go impetuous and down-to-earth, strictly supervise and clear the sky

Whether the trend of Chinese chip entrepreneurship can really take off depends on the dominant direction of national policies and the concerted efforts of large companies. Of course, the most important thing is the efforts of every core maker.

Now is the era of great development of the semiconductor industry, a good time to enter the semiconductor industry, a good time to start a business, and a good time to do things steadily. For domestic semiconductor people, this is a great time.

From the perspective of technological development, Moore’s Law is close to the edge of failure, and innovation in material technology is hovering at the edge of research and industrialization. Third-generation semiconductor materials such as silicon carbide and gallium nitride are beginning to show their prominence. 

From the perspective of downstream applications, new technologies such as artificial intelligence, big data, cloud computing, and the Internet of Things have brought broad market prospects, and the market has unlimited room for imagination. From the perspective of national policies, the Chinese government is determined to vigorously develop the chip industry from the country to the local level.

However, in the booming wave of chip entrepreneurship, there are real wavers and troubled fishers. It is true that the Times semiconductor industry does have abundant opportunities. But to really make a sound, you need the team spirit of chip entrepreneurship, the spirit of ingenuity, and most importantly, leaders who truly understand technology and the market need to lead the team. The training cycle of this kind of talent often takes 20 to 30 years. Frequent digging and job-hopping will only make people feel irritable.

We hope to see that every chip start-up company can uphold the original aspiration of seeking development for the industry and for the country’s prosperity and strength, and work steadily.

A hot industry must have a bubble, and a moderate bubble will help the development of the industry. How to judge this “moderate” is a science and an art. To stop the bubble from becoming too large requires powerful means. We suggest that chip companies that have been listed on the Science and Technology Innovation Board or are about to go public should set the original stock release time strictly according to their operating conditions, and companies that have not reached the profit target within the specified time should not be allowed to sell their original stocks. When the requirements for listing on the Science and Technology Innovation Board are stricter, or the post-review of listed companies is stricter, and some companies are ordered to delist, it may be the time when this wave of chip entrepreneurship ebbs, or it may be the time when the chip industry will see the light .

It should be noted that the Sci-tech Innovation Board is only the black land that nurtures industries, not someone’s paradise for making wealth.

Posted by:CoinYuppie,Reprinted with attribution to:
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