Semiconductor, AI firms dominate venture capital deals in China amid government push

Ninety per cent of global venture capital investments in the chip sector last year came from China, according to Preqin research

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China leads the world in chip-related venture capital investments last year, according to Preqin. Photo: Reuters

Published: 8:00pm, 4 Jul 2024

China’s largest venture capital investments are increasingly coming from technology sectors that align with the government’s policy goals, such as artificial intelligence (AI) and semiconductors, even as overall funding continues to plunge, according to a new report.

The country contributed 90 per cent of global venture capital investments in the chip sector last year, totalling US$22.2 billion and more than doubling the US$9.5 billion invested in 2022, research firm Preqin said in a report released on Thursday.

Half of the semiconductor venture investments came from three “mega deals” led by partnerships between municipal authorities and Sino IC Capital, the asset manager of the state-backed China Integrated Circuit Industry Investment Fund, known also as the Big Fund, according to Preqin.

Those include the 39 billion yuan (US$5.4 billion) raised by Changxin Xinqiao Memory Technologies in October, US$4 billion by Hua Hong Grace Semiconductor in January last year, and US$3.2 billion by Hua Hong Chengdu in December, according to Preqin.

Fundraising in China’s semiconductor sector appears to have slowed down since, with only US$1.6 billion invested across 128 deals in the first half of this year, Preqin data showed, although the country still accounted for four of the world’s 10 largest chip industry investments during that period.

State-backed investors are playing a growing role in private market funding in China, participating in about 60 of the 100 largest deals from 2021 to June this year, twice as many as from 2017 to 2020, the research company said.