Internet & Tech

Chips on the menu

Cambricon heads for IPO in bid to fund semiconductor push

Cambricon-w

Plans to IPO on Shanghai’s STAR Market

Early this year Alibaba released Hanguang 800, a chip designed specifically to support applications in artificial intelligence and machine-learning. Although the e-commerce giant is relying on TSMC in Taiwan to fabricate the chips, there was excited chatter about Hanguang’s capabilities, with claims that it was outperforming the other chips in its class. This came as a surprise: Chinese semi- conductor production is still thought to be well behind the American chip companies.

The counterargument is that the Chinese have been making more headway in particular types of chips – chips for artificial intelligence applications being one of the examples. China has a chance to “overtake the competition on the outside in AI chips,” Wang Yuntao, a deputy director at the state-backed China Academy of Information and Communication Technology, claimed recently. And with this in mind, another of China’s largest AI chipmakers, has announced that it is planning an initial public offering on Shanghai’s STAR market.

Cambricon was valued at $2.5 billion after its B series funding round in 2018. Its investors include some of the larger state-owned funds, as well as Alibaba Group and voice intelligence specialist iFlyTek.

Founded in 2016 by two brothers – Chen Tianshi, 35, and Chen Yunji, 37 – Cambricon first made its name as Huawei’s partner in AI chips. Using Cambricon’s NPU (neural processing unit: a microprocessor that specialises in the acceleration of machine learning algorithms), the telecoms equipment giant launched its own chipset Kirin970 in 2017.

Many of Huawei’s flagship handsets like the Mate 10, the P20 and the Mate20 were powered by Kirin970, and its update Kirin980, says National Business Daily.

Huawei quickly became Cambricon’s largest revenue generator. “Assuming Cambricon received $5 per phone in licencing fees, the company made about $200 million for the 40 million phones Huawei sold using the Kirin970 processor,” says iResearch, a market intelligence firm.

This relationship came to an end in 2019, when the telecoms equipment giant unveiled its Ascend 910 AI chip, using a homegrown Da Vinci NPU.

Calling it “the world’s most powerful AI processor,” Huawei claims that the Ascend 910 can process a larger amount of data faster than its competitors.

When asked why Huawei had stopped working with Cambricon, its AI head Xu Zhijun explained: “Cambricon’s IP is quite good, but it is not enough to meet our needs to have chips that can support all AI application scenarios. We want an architecture that can deliver both extremely big computing capacity and extremely low-power consumption.”

Cambricon says that the split was an amicable one. Chen Tianshi also reckons that Huawei’s foray into AI chips points to how important the sector is going to become. But without Huawei, Cambricon is having to expand its customer base. The costs of developing new forms of AI chip are prohibitively high without economies of scale (shipments of 10 million units or more are needed to stay in business, insiders suggest). At the moment, Cambricon’s chips are mainly used in smartphones and Internet of Things (IoT) devices used to identify images, audio and video data. That also explains why the market debut in Shanghai is going to be important. “After the completion of the IPO, Cambricon will have raised more capital to invest in research and development. This is going to be very important for a company that is founded on technology to jumpstart its business. It could also help it deal with issues like how to get over the loss of its largest customers and how to expand its market share and newest iterations in technology,” says Huxiu.

Horizon Robotics ­– another AI chip designer – raised $600 million in its latest funding round in late February, led by South Korean conglomerate SK and memory chip manufacturer SK Hynix. The round values the Beijing-based start-up at $3 billion. Horizon is focusing on developing AI chips to power surveillance cameras, autonomous vehicles and other IoT devices.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.