[Nearly 20 large-capital investment analysis: Why commercial capital is not optimistic about the chip? 】 "Society is now saying that investors are bastards, not chip companies, making China's chips stuck in their necks. These arguments are very numerous." Speaking of the ZTE Incident and China's chip investment, Deep Ventures Chairman Ni Zewang expressed his frustration in his tone.
Zhu Xiaohu, Managing Director of Jinshajiang Venture Capital, also had a deep understanding of this and disclosed that he had planted pits. “We are not chip-free. Before we voted, several of them lost everything.†Zhang Suyang, a partner in the management of volcanic rock capital, said with emotion that "chip investment is equivalent to selling soap."
In April 2018, the heavy punch of the United States' heavy penalty for Zhongxing made us realize suddenly that we were so passive in core technologies such as chips. "More than 90% of China's advanced chips are dependent on imports. High-end chips are the largest imported product, followed by crude oil. The latter will spend about 200 billion US dollars annually." Xiaonan Xiao, deputy head of the Central Inspection Unit 9th, revealed earlier.
Faced with such a huge market gap, why commercial capital is not optimistic about the chip? Where is the difficulty of chip investment? What kind of enlightenment can we give this bell of the ZTE incident? What opportunities do we have in the next phase? Looking back at the history of investment in China for more than two decades, why have we created numerous model innovation companies with valuations exceeding 10 billion U.S. dollars, but rare giants of technological innovation?
In response to these problems, there are nearly 20 investment giants and entrepreneurs sharing and reflection.
Why commercial capital is not optimistic about the chip?
Xiao Chen, CEO of Da Chen Financial Intelligence: A large number of technological innovation companies are waiting to be fed
China is a latecomer and catch-up society. Whether it is a business or an individual, they are often short-sighted and they can't wait to compete. Everyone is willing to do something immediate, rather than do long-term accumulation of results.
In the past few years, a large amount of money was invested in business model innovation. However, when a large number of technological innovation enterprises are in need of assistance, the organization neglects to invest in them. Everyone hopes to quickly achieve results. A few months will be fattening a company. It will be listed in one or two years, but it ignores the status quo in China and there are still a lot of technologically backward parts that need to be remedied. This is where reflection is needed.
Jia Zhe Fund Founding Partner and Chairman Wei Zhe: “More money, faster, and more peopleâ€
There was a joke before. A liar said to the B liar and came to us quickly. “People are stupid, money is good, they are quick.†I think that China's venture capital industry happens to be the reverse of these words: "The money is more, faster, and more silly." How much money? In 2017, China’s VC/PE industry raised as much as RMB 1 trillion in light RMB, and US$ 60-70 billion in USD funds.
However, this money has a finite number of years, ranging from 7-8 years to 10-12 years. Therefore, there are requirements for speed. If you have more money, you must speed up. Investors want speed. Entrepreneurs also want speed. This will definitely affect investment.
Zhou Zhixiong, Executive Partner of Kaixuan Venture Capital: Chinese investors lack patience
Ten years ago, the Chinese VC model copied the United States. Today, all of them involve Consumers. When it comes to using money to solve problems, China is ahead. The development of the United States has been decades longer than China, and its overall model, including the upstream and downstream systems, has been able to withstand relatively long development, and investors have greater patience. The capital market in the United States supports innovative technologies. Some companies may not even have the income to be listed, but China does not support it. This is a clear difference. From the perspective of returns, China is entirely based on Consumers and has received excess returns. Investors will naturally tilt to that direction.
Where is the chip investment difficult?
Zhu Shahu, Managing Director of Jinsha Jiang Venture Capital: A disproportionate investment and return
We are not chip-casting. Several of our previous investments have lost everything, and they have also contributed to China's technological innovation. China's chip technology has several difficulties: First, most companies are single products. In the long run, there will be problems with returns. Because of the short life cycle, it will soon drop to the average level. In addition, the company's initial investment is large, and R&D personnel and streamers (such as the assembly line to manufacture chips through a series of process steps) require high costs. However, companies often have low valuations. Unlike Tencent and Ali, which can value four to five hundred billion US dollars, the most successful chip may be one to two billion US dollars. For VCs, this investment is not proportional to the return.
Kaixuan Zhou, an executive partner of Kaixuan Venture Capital, is expensive and has low returns
Investing in the chip industry, it takes a lot of money to raise a professional team, but the return is a few digits in all categories. There are great opportunities in the Chinese market, but the challenges are even greater.
Zhang Suyang, partner of volcanic stone capital management: capital is profitable
Where is the problem with the chip? Either success or failure, unlike some of the model innovations, this road can be changed immediately. Second, even if most of the chips are successfully put into production, it is basically the average profit. For VCs, they may prefer to invest in projects that generate greater demand and can quickly recoup their money.
Now, many things in the market are more likely to generate returns and profitability than chips. As long as this phenomenon still exists, the number of chip-casting companies is still small. This is a matter for normal commercial companies to choose. Because capital is profitable, this is a realistic issue. I think this is beyond reproach.
Northern Lights Venture Capital Managing Director Yang Lei: Long Industrial Chain, Complex Process
The difficulty of chip investment is that the industrial chain is very long and the process is very complicated. The cost of a tapeout may be as high as a few million dollars. In addition, there are still human costs, capable chip engineers need at least five years of training, training costs are also starting millions of dollars. At the same time, it takes at least 18 months for a team to make a chip.
DaoCloud co-founder Chen Qiyan: Technology is difficult to translate into productivity
Chips are heavily invested in assets. Private enterprises or state-owned enterprises are faced with huge financial risks and no talent pooling effect. Therefore, the input of these things often requires the will of the country. Part of the difficulty of this process is that a large number of social resources are precipitated in projects led by the state, but in the end, if technology is to be converted into productivity, it depends on commerce, and building on the original system is difficult.
Reflections on the "ZTE Incident"
Fengfeng Capital founding partner Li Feng: The chip problem is not only an economic issue
Of the US$40 billion to US$50 billion chips produced in China, foreign capital accounts for about 80%. More than 51% of the factories are produced just like imports. They are only produced in China, adding up to less than US$300 billion, or about two trillion yuan. output value. A piece of money in the chip industry represents the value of the four-dollar industrial chain, that is, the value of the industry chain of 8 trillion to 10 trillion yuan.
Of China's consumer electronic products with chips, 90% of the chips are imported. Qualcomm’s 2016 profit was US$5.7 billion, of which 60% was contributed by China. Adding together all the national data means that in this economic cycle, five to ten years, we have ten trillion industrial chain values ​​and close to 150 million jobs, related to the upstream and downstream links of this industry chain. In this cycle, if China does not solve this problem, it is not only an economic issue, it may have social stability issues.
Mr. Liu Qin, Managing Director of Morningside Capital, should pay active attention to the underlying technological innovation
How to look at the chip and the underlying technological innovation? I think we must return to the nature of business and actively focus on the underlying technological innovation.
In the past, China used the market for technology and missed the development of the chip in the 1970s and the development of the PC in the 1990s. In 2000, it merely caught up with the window of innovation in the Internet model. But today, China has the opportunity to use the market to create technology because Timing is right. Our talent and capital have the opportunity to create original technologies on the same starting line, relying on China's strong market size. At the moment, China's investment opportunities have gradually entered deepwater areas. Looking forward to the next 20 years, the challenges are great, but the opportunities still give us confidence.
Chuangdong Chairman Xiao Shuilong: Investment in Technological Innovation Must Understand
I think it is time for venture capitalists to pay more attention to technological innovation. Because the core innovation has vitality and competitiveness. This wave of model innovation has passed, but there are still greater technological innovations, including biology, AI, and the chip industry. Investment still needs to sink, LP does not understand, but we must stick to it. Only in this way can we earn more.
Yang Xiaodong, President of Former U.S. Fidelity Investment China: To Build His Own Ecology
I think the recent ZTE incident is just the beginning of trade frictions. From now on, ZTE will be one after the other. We want to establish our own ecology. We hope that the country can provide (growth) soil in terms of taxation, intellectual property, etc., and at the same time give VC money to entrepreneurs through VC instead of university professors. VCs will discover those who want to change the world.
First of all, now that so many people are making chips, there is a big leap forward. Second, VC really should not turn these people who have ideals and want to change the world into so-called capitalists. Third, I am not optimistic about investing in the soil at the moment because everyone is swarming to do this thing.
Yang Ligong, Director of Risk Analysis Department of Citigroup, will break the blockade on chip within five years
It is estimated that for about five years, we will break the blockade in some areas. One of the biggest driving forces is certainly from the capital side, as well as national industry funds, which is the result of the joint efforts of both parties.
Wu Xingkun, President of Haoyou Optoelectronics Co., Ltd.: It takes five years for China to have disruptive chips
There is an upstream chip company that fell 35% on the day of the ZTE incident because they are important suppliers for Huawei, ZTE and other companies. This company was founded in 2009 and is a US-listed company. The chip design is very precise and it is subversive rather than improved. More domestic chips are now alternatives, replacing relatively simple chips in the middle and lower reaches. It now appears that China needs at least five years to find a subversive chip that the market can use.
Yuan Li Capital Partners Yu Lifeng: Cannot be satisfied with model innovation and short-term benefits
Over the past 30 years or so, China has had many model innovations in entrepreneurship or investment in Internet-based development. However, future development will surely change from model innovation to technological innovation. In the past, we did not realize or realized it but did not pay much attention to it. The most core chips, sensors, etc. must be imported from abroad, but the real core technology can not be bought. The core-limit incident was to thank Trump for warning the Chinese people. We cannot just be satisfied with model innovation and short-term interests. To invest in and develop China's core technologies and build projects and industries that truly have the underlying core technologies is crucial to the long-term stability of China.
Guangqing Capital founding partner Zhu Qing: boosting good projects with underlying technology
The real underlying technology investment is a long-term issue. The ZTE incident has alarmed us. No group can do it alone. We need venture capital agencies to work together with the entire capital market to boost good projects with the underlying technology.
Baidu VC CEO Liu Wei: Short-term friction, long-term cooperation
Now China’s capital has invested a lot of model innovations or “application innovations.†With this kind of drive, China’s first time has reached a point in time – the ability to compete with the United States on the new architecture, and Chinese companies have the ability to Technical fields and the United States companies strive for the development of new standards. How to restrict China’s investment in the United States? Many advanced things in the United States still have to be sold to China’s applications. Otherwise, he cannot use this cycle to accelerate development. I think there are some short-term frictions, but long-term cooperation is inevitable.
Where are the chip investment opportunities?
Jinsha Jiang Managing Director Zhu Xiaohu: Artificial Intelligence Chips Should Take the Lead
Any major industry is cyclical. After the big new platform comes up, the company that comes out first must be hardware. There is still an opportunity for China in the area of ​​artificial intelligence chips. Once a chip is put into a platform, new companies will find it difficult to do so. Because if a competitor occupies the market by taking the lead and amortizes equipment costs, there is no way to compete because the cost curve is far behind the competitors unless it is heavily subsidized and supported by the government.
Northern Lights Venture Capital Managing Director Yang Lei: China's chip companies to "cross-dimensional" competition
It is not difficult to make a chip, but it is very difficult to make a high-performance chip. It is more difficult to achieve a product yield of more than 95%. A chip company wants to establish a foothold, at least 20 million US dollars, under 20 million US dollars, everyone fights money, 20 million more fight is the ability.
The key to a startup company is the founder. A founder who is not sure of the product can hardly bring the company out. Looking back at our hard science and technology investments, we also initially made the mistake of obsessed with the academic school: the distance between technology and real industrial applications is very large. Now we prefer to really touch the established team in the industry.
At present, the current status of the global chip industry is that one end is a highly flexible NVIDIA GPU and the other is a low-power but not flexible Google TPU. I think the opportunities in the future will be in the middle of both ends, and companies must find the right balance in them. My suggestion is that China's chip companies, even if they are doing the same market, are better off taking the road different from big companies, and they must have a "cross-dimensional" competition.
Ding Xing Quan Partner Wu Yenan: There are two paths for domestic semiconductor companies to break through
The first is to rely on a strong market terminal to support and nurture, so that it enters into a virtuous circle as soon as possible; the other is to enter the subdivision field, quickly grow bigger and stronger to occupy the market.
In order for domestic semiconductor companies to grow up, they must have some special paths and it is impossible to copy American companies. In the semiconductor company's investment, it is necessary to find a team with excellent technology and provide it with certain market support so that it can quickly become bigger and stronger in the market segments. With sufficient accumulation, it began to spread to the international market.
Guo Hai Investment Managing Director Li Haifei: Artificial Intelligence Upstream Hardware and Software Applications Have Great Potential
Artificial intelligence is the door to a genuine productivity revolution. This door has already opened. By 2020, the artificial intelligence industry will bring at least 5 trillion, or even 10 trillion (market) sizes. This will also drive the development of a large number of upstream hardware and software applications. Such as the upstream machine learning chip, optical VCSEL chip, MEMS (micro-electromechanical systems) and so on.
Wang Jingmin, Chief Scientist of Super Crystal Technology: The future of compound semiconductors is very bright
After the end of Moore's Law in integrated circuits, how to continue to develop integrated circuits, an inevitable trend is to find new materials, such as compound semiconductor materials. Intel predicts that by 2030, compound semiconductors will account for 60% of the entire semiconductor chip market, and the future of compound semiconductors is very bright.
Guang Yan China founding partner Han Yan: In 20 years, global Chinese talent will return
The media said that China only has model innovation, but we have underestimated its ability to innovate. I don't think that China has no talent. The opportunity I have seen is that in the next 10-20 years, China will return to the global talent pool. In the underlying technologies such as AI, Chinese talents account for a large proportion in the world.
Dan Daihong, founding partner of Dann Capital: Investors should pay more attention to the chip field
In the near future, China is talking about chips, but investors should take a rational view. Unlike the 2C industry, whose chips have strong capital and strong execution force, whoever can rush out, chips need decades of effort. The investment in hard technology is a sword in ten years and twenty years. It is not as sexy as the 2C industry. “It is a long marathon.†However, like Foxconn's return to the A-shares, it shows the government's signal that China is extremely eager for hard technology. For investors, more attention should be paid to this area.
Zhang Suyang, partner of the volcanic stone capital management: Real AR chip can generate high profits in the short and medium term
Investing in chips for a period of time, unless it is a true AR chip, such as a good neural network 30-layer, 60-layer, 90-layer, etc. can be well superimposed, a lot of application software can be put in, and a piece of chip can be solved, maybe Produce high profits in the short and medium term. Other things are even if you do, that is, the average profit or zero profit status. The zero-profit state is not really zero profit, but is about the same profit as selling soap in the chip field. This situation will affect business investment behavior.
Advice to investors?
Xiao Chen, CEO of Dachen Financial Co., Ltd.: Return to the Source of Investment
All kinds of investment strategies to wrap the coat to strip off the coat, the core is nothing but arbitrage and speculation. What about the future trend? Everyone is also confused. The market is changing rapidly, and the policy is changing. How to deal with it? I think it is still necessary to return to investment sources, invest in something that can see long-term value, and do long-term industrial research and research. Really valuable things persist in 5 or 10 years. The return on investment will not be bad. Don't chase short-term hotspots. Don't follow the short-term policy. Keep a steady heart to look at investment.
We often overestimate the present and underestimate the future. To believe in the future, the power of value is the power of time. We must believe in the achievements of long-term and arduous struggles, and do not believe in the results of short-term arbitrage. Such results may be, but are accidental, and are not worth our studying.
Deep Venture Capital Chairman Ni Zewang: Returning to the Heart and Sticking to Value Investment
Nowadays, the society says that investors are bastards, and you don't invest in chip companies, making China's chips stuck in the neck. Now the whole society is keen to say that it is going to invest in chips. In such an era of confusion, I think it is necessary to return to the beginning and think about how to stick to value investment, including chips. It is also necessary to remember the basic laws of the market economy. We cannot afford to conquer the world. Second, all technologies, especially the original ones, are not just relying on money to be successful. They need to work together from top to bottom.
Jia Zhe Fund Founding Partner and Chairman Wei Zhe: Look at height and depth
The advice for Chinese entrepreneurs and investors is to look at heights and depths. If we only look at breadth and speed, there will certainly be a large number of dead corpses of unicorns waiting for us in the near future.
Liu Feng, Deputy General Manager of Goldwind Investment and Control Co., Ltd.
Like in this kind of import substitution opportunity, we must consider the product cycle. Now that there is an integrated circuit, there are also Moore's Laws. With so much investment, why didn't China come out? I think that we must pay attention to the logic of lane change and overtaking, which has been fully verified in the field of new energy vehicles.
Zhang Bao, Chairman of TouchPal Technology: Software Worries About Me More Than Chips
After the ZTE incident, we discussed more about the replacement of domestically produced chips. I think the more irreplaceable part is the software, which is the operating system. If the chip can find alternatives, then Google's operating system may not have any alternatives. I do software and the Internet. From my point of view, the level of monopoly of the software industry by US companies far exceeds hardware, which makes me even more worried.
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