Non-government investors such as Walden, Matrix, and Sequoia joined hands in almost 58 investment deals in China’s chipset making industry from 2017-2020
The worldwide lockdowns, which has escalated the demand of electronic items and digitization, are largely responsible for the global slump in production of chipsets. While the diminutive production of chipsets causing tensions for several industrial segments around the world, the case of China is different because there is a rapid increase in the production of electric vehicles and 5G. Now, both these areas require a huge quantity of top-quality chips.
This is why China has been investing in its semiconductor manufacturing capacities on a national priority, which has opened doors for various investors from all over the world. Both the US and China are spending tens of billions of dollars in this segment, but still there is a huge difference between both the countries. The US semiconductor industry is already dominated by the international tycoons such as Intel, Nvidia, and Qualcomm, whereas China has very recently commenced perking-up its semiconductor manufacturing.
The interesting point to be noted is that China started manufacturing the most in demand chipsets and kept it as a priority. Although the market share starts from nearly zero, experts believe there are numerous companies that are quite healthy to counter this impediment and increase the share to two-folds in the coming 1-2 years. Non-government investors such as Walden, Matrix, and Sequoia joined hands in almost 58 investment deals in China’s chipset making industry from 2017-2020.
Experts again believe that the basic reasons behind magnetizing the investors are strong government support, lower costs with additional supply chain efficiency gains, and digitalization trends that are outpacing the rest of the world. Like the US government, the Chinese authorities also believe that dependence on import of chips is a serious national security accountability. In the current 14th five year plan, the manufacturing of processors was given as a national priority and by the end of 2025, the country has decided to reduce its import by 70 percent and complete reduction or substitution in import by 2030.
A lot of capital is already being provided by the Chinese government to achieve the goal. Back in 2014, a National Semiconductor Fund was formed with a starting of $35 billion and another $21 billion in 2019. In the coming years, more than fifteen local government semiconductor funds have been formed with a total of $25 billion.