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Why don't China VC invest in chips? Investors: profits and soap consumption are almost the same.

via:网易科技     time:2018/6/4 9:13:54     readed:434

And the American sanction ZTE event makes the development of the chip and semiconductor industry present to the public again. According to the statistics from the China Semiconductor Industry Association, the import value of domestic integrated circuits in 2017 is 260 billion 100 million US dollars, which is the largest import commodity in China.

The "big cake" in the chip market is rarely asked, but compared to the domestic pursuit of business model innovation, why does technological innovation have not attracted enough attention?

Investment chips profit and sell soap

"China's VC is not a chip. Before we voted, several of us lost everything." At the 2018 annual meeting of the group, Zhu Xiaohu, the director general of Jinsha River investment director, who had invested a drop, hungry, ofo and other enterprises in the tuyere, returned the question to the outside world.

Zhou Zhixiong, executive partner of triumph venture capital, regrets that the investment chip industry has a lot of money to pay for professional teams, but returns are the last few in all categories. "Now the opportunities in the Chinese market are great, but the challenges are bigger."

For the chip investment status, all investors mentioned these points: high investment cost, high threshold, long cycle and low rate of return. Therefore, former IDG Capital Partners and founder of volcanic rock capital Su Yang called for public opinion to understand the VC industry.

"It's a real problem, it's a real problem. I think it's a real problem." he thinks that many things in the market are more likely to produce returns and profit margins than chips. As long as this phenomenon still exists, the chips are still few, which is a problem for a normal business company to choose.

In addition, the chips are either successful or fail, unlike some business models, which can be changed immediately. At the same time, for VC, they prefer to invest in projects that produce greater demand and more quickly to bring back their money, "and gain almost the same profit as soap in the field of chips. This situation affects business investment behavior. "

What are the difficulties in chip investment?

Whether chips can be voted or not is controversial in the industry, and what are the difficulties of investment chips, and it is also a topic of concern to the industry.

"Most of the chip companies in China are single product companies, with large initial investment and short life cycle. In the long run, investment and return are disproportionate." In addition to the above, Zhu Xiaohu believes that there is another difficult point for investment in chip technology: in the medium term, any big industry is cyclical, and when any big new platform rises, it comes first to be a hardware company.

In retrospect, there are Intel, IBM and CISCO in the PC era. Once the chip is invested, it will be difficult for the new company to do so. Zhu Xiaohu stressed, "especially the early investment of the chip company, if the competitors rely on the market to occupy the market and amortize the cost of equipment, the cost curve of the later is far behind the competitor and cannot compete with it unless it relies heavily on the government's subsidies and support." "

Yang Lei, managing director of Aurora ventures, explained from the angle of industry. "The difficulty of chip investment is that the industry chain is very long and the process is very complicated. The cost of a single chip can be as high as several million dollars. " In addition, there are human costs. It is understood that capable chip engineers need at least five years of training, and the cost of training is millions of dollars. At the same time, it takes at least 18 months for a team to make a chip.

Although there are all these problems, Zhou Zhixiong believes that the opportunity of chip investment in China is very large now, because the application of chips is in China. Zhu Xiaohu also said that Jinsha River investment also invested in one or two companies.

After a project is fire, it will copy numerous similar projects, and the funds will flow into the field in a short time, and the chip field is no exception. "Now that so many people are making chips, there is a sense of great leap forward." Yang Xiaodong, former chief executive of Fidelity Investment in China, expressed concern about the fact that he is not very optimistic about investing in the soil because everyone is going to do it.

How should the chip industry do it?

"This market has become a market with little money, but it will continue in the short run." Hao Dan, chairman of Shenzhen Hengtai Hua Sheng Asset Management Co., Ltd. disclosed that the semiconductor project has already paid 1~2 times premium.

The investment market has already appeared "chip heat", and entrepreneurs have also begun to flow into the field of chips, but different from business model enterprises, technological innovation enterprises have a high threshold, especially high technology and heavy assets invested in the chip industry.

"Making a chip is not difficult, but it is very difficult to make a high-performance chip, and it is more difficult to make the product more than 95%." Yang Lei, the director general of the northern lights, believes that a chip company wants to stand for a foothold, at least 20 million dollars, under 20 million dollars, everyone is spelling money, more than 20 million is all the skills.

At the same time, for high-tech companies, even if they have enough capital, a founder who is not sure about the product is also very difficult to bring them out. Yang Lei reviewed the hard science and technology investment of northern light venture capital, and concluded that the distance between technology and real industrial application is very large. "At the very beginning, we were also obsessed with the mistakes of academics: now we prefer the team that is really rolling in the industry."

Where is the investment opportunity for that chip? Zhu Xiaohu believes that there are still opportunities for AI chips in China, but once the chip is invested, it will be difficult for new companies to do so. "Because if the competitors take the opportunity to occupy the market and amortize the cost of equipment, you can't compete, because the cost curve is far behind the competitors, unless a large amount of subsidies and support from the government."

Based on the above point of view, DaoCloud co - founder Chen Qiyan believes that the chip is a heavy asset investment, private enterprises or state-owned enterprises to invest in the face of huge financial risks, and there is no talent agglomeration effect. "So many of these things need national commitment."

"To build your own industry ecology." Yang Xiaodong, former president of Fidelity Investment in China, believes that the development of the industry should not rely too much on the government. He appealed to the country to provide soil for growth in taxes, intellectual property and so on, and to give money through VC to entrepreneurs, not college professors, and to find people who want to change the world by VC.

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