Original link: https://www.latepost.com/news/dj_detail?id=1140
An industry dominated by giants for many years now has more than a dozen Chinese startups. This sounds like an exciting story.
Over the past 20 years, China’s Internet has flourished, but few domestic startups have set foot in the CPU (Central Processing Unit, central processing unit). It is a large computer used in a data center, that is, a server; a personal computer; a core component of devices such as mobile phones and tablets; it dispatches hardware computing resources downwards and carries software operating systems upwards. It is one of the cornerstones of the information industry and the Internet.
This is a market with strong barriers and a relatively stable pattern. Intel and AMD have dominated server CPUs and computer CPUs for many years; Qualcomm and MediaTek are the main players in mobile phone CPUs, and their products are based on Arm IP. According to IC Insights, the total global CPU sales exceeded US$83 billion last year. Due to the oligopolistic nature of the CPU market, a few companies such as Intel, AMD, and Qualcomm took most of the cake.
But now, a group of Chinese startups is trying to tear a hole. Since last year, more than a dozen new CPU companies have emerged in the Chinese market, most of which are CPUs based on Arm architecture, including Qilingxin, Xixin, Hongjun Micro, this core, and Yuxian Micro. Some of the leading companies are valued at $200-300 million.
The core personnel of these companies have splendid professional resumes, attracting many institutions such as Hillhouse Capital, Qiming Venture Capital, Lightspeed China, Yunjiu Capital, Shunwei Capital, Yuanhe Puhua, etc. Among them, those who are good at financiers have already completed the business within half a year. Valuation doubled.
Chinese CPU companies appear in batches
In October last year, Pingtou Ge, a semiconductor company under Alibaba, released the Yitian 710, an Arm-based server CPU for data centers. This is one of the triggers born from this batch of Arm CPU companies.
Almost before and after the release of Yitian 710, a number of start-up companies with the background of Ali Pingtou entered the vision of investors.
“LatePost” exclusively learned that Qi Lingxin, which was established in the second half of last year, has completed angel rounds and A rounds of financing totaling about 600 million yuan. Investors in the angel round include founders of many semiconductor companies such as Silicon Lijie, Shixin Technology, Weir, and Hengxuan Technology. Investors in the A round include Lightspeed China.
The core technical personnel of Qilingxin include Lin Wei (Wei.L), from Ali Pingtouge Meiyan, Ali P10. He has been in the chip industry since 1997, and has participated in the development of Intel Itanium processor (x86 architecture server CPU) and Huawei Hisilicon Kirin CPU (Arm architecture mobile phone CPU). He joined Pingtou in 2019.
Another company with Ali Pingtou Ge’s background is Westchip. In October last year, the Westchip team was already in contact with investors, and its core personnel also participated in the research and development of Yitian 710. The company has yet to make a public appearance.
Daniel Chen, CTO of Hongjunwei, which was established in August last year, also participated in the research and development of Yitian 710. He has successively served as the Chief CPU Architect of HiSilicon and the R&D Director of Ali Pingtou Ge SoC. Hongjun Micro CEO Shen Rong worked at Intel for 20 years before joining Inspur, serving as Inspur Information Vice President and General Manager of the Server Product Line. Inspur is a state-owned enterprise with a long history dating back to 1945. It is currently the largest server manufacturer in China, with a market share of over 30%, and is an important downstream customer of server CPUs.
At the end of last year, Hongjun Micro announced that it had obtained an angel round of financing. The investors were Hillhouse Capital and the nearly 3-year-old GPU startup Biren. The current valuation of Biren is close to 20 billion yuan. The main product is the GPU, which is also used in the data center. Zhang Wen, the founder of Biren, said that the data center system of “CPU+GPU+DPU (Data Processing Unit)” should be built. level solution. This combination was first proposed in 2020 by Huang Renxun, founder of GPU giant Nvidia. Biren is a start-up company, but likes to tell high-investment ecological collaboration stories. Zhang Wen specializes in financing, resource integration and team recruitment. Two months after investing in Hongjun Micro, Biren invested in Yunmai Xinlian, a DPU company. At the end of last year, Zhang Wen also promoted the establishment of an autonomous driving company, Yunji Zhixing, as the chairman. Autonomous driving is another important application scenario of GPU in addition to data centers.
An investor in the chip field told “LatePost” that the CPU projects from Ali Pingtou are not only Qilingxin and Xixin. The core teams of these two companies are from Alimeiyan and are not subject to competition restrictions. However, some teams from Pingtou Ge’s Chinese department are still underwater due to competition and other reasons.
Another chip investor analyzed that the reason why Pingtou has left so many people is mainly because there is no shortage of early investment in starting a business at this moment. If it is done, the final income of the founding team will be much higher than that of “working in Pingtou”, and Ali’s overall style It is still an Internet software company and needs to produce results in a shorter time. There are also many changes in the internal demand for chips, and some chip practitioners are not suitable for it; the loss of these personnel may affect Alibaba’s subsequent product iterations.
In addition to the influence of Yitian 710, there are some players from other backgrounds who have joined the wave of CPU entrepreneurship.
This includes Yuxianwei, which was established in October 2020. It was founded by Luo Yong, the former deputy general manager of Zhaoxin. Zhaoxin is a domestic CPU company established in 2013, mainly for the Xinchuang market. In the founding team of Yuxian Micro, there are also members from Arm and Intel.
In October last year, Yuxianwei received hundreds of millions of angel round financing led by Innovation Works, Ivy Capital and Oriental Fortune. Except for Innovation Works, the other two investment institutions are RMB funds. Among them, Orient Fujia is a fund of Orient Financial Holdings, a listed platform of Zhejiang state-owned financial holdings.
Qilingxin, Xixin, Hongjun Micro and Yuxian Micro are all targeting the server CPU market, and another company that has received financing, this core, is targeting the computer CPU market. It was founded in October last year by Sun Wenjian, the former head of AMD’s customer customization department in China. Its CTO Liu Fang has successively served as the chief SoC architect of Meta (Facebook), AMD SoC architect and Apple’s core architect, and has 11 years of iPhone/ iPad development experience, participated in the development of Apple M1.
This core has announced the completion of three rounds of angel rounds of financing totaling 100 million yuan. The angel round investor is Lenovo Venture Capital; the angel + round lead investor is Qiming Venture Capital, and the co-investors are Yuanhe Puhua, Yunjiu Capital, and Cloud Xiu Capital; Angel++ round was led by Shunwei Capital, followed by Qiming Venture Partners and Yunjiu Capital.
“LatePost” also learned that this core has just completed a new round of financing, namely the Pre A round of financing, led by a car company. The first round of valuation of this core was about 90 million US dollars. Before the new round of financing, the valuation has reached 200 million US dollars, which has more than doubled in about half a year. After receiving investment from Lenovo Ventures, the chip set its business direction as computer CPU chips, and benchmarked against the Apple M1 that Liu Fang had participated in. Lenovo sold 81.9 million PCs last year, with a global market share of 23.5% and China (mainland) market share of nearly 40%, both ranking first. Lenovo is an important strategic investor for this chip that wants to be a computer CPU.
double chance
One of the reasons for the emergence of new companies is technological change.
In the past, the CPU market was clearly divided. On the one hand, there were servers and computer CPUs that required multi-core and high performance, and on the other hand, mobile device CPUs such as mobile phones and tablets pursued low power consumption. The former is dominated by the x86 architecture and the latter is dominated by the Arm architecture.
In recent years, the new technology trend is that the Arm architecture is entering the server and computer market. This situation is established by two chip customers with strong self-developed capabilities: Amazon and Apple.
As the pioneer of the global cloud computing market, Amazon AWS is a big buyer of server CPUs. In 2018, Amazon launched the Arm-based self-developed server CPU Graviton, proving that the Arm architecture can be successfully applied to server scenarios and shaking the x86 monopoly.
Various cloud computing companies have also followed this trend: the Kunpeng 920 launched by Huawei in 2019 and the Yitian 710 released by Alibaba last year are both Arm server chips. At the end of last year, it was reported that Google will also develop its own server CPU based on Arm.
Server CPU is the most mainstream direction of this batch of new CPU companies. The core technical personnel of Qilingxin, Westchip, Hongjunwei and other companies have all participated in the development of Ali Yitian 710. Going back, these people also have experience in developing CPUs in Huawei. It is in the trend of Arm’s attack on the server market that they have accumulated key R&D experience and are more favored by investors when financing: When the technical strength is difficult to distinguish, a simple logic is to see who has made similar things. .
Apple has led the trend of Arm CPUs entering the computer market.
Apple’s Mac line of desktops and laptops has long used Intel’s x86 CPUs. But in 2020, Apple launched the Arm IP-based self-developed M1, which has been used in multiple Mac products one after another. The MacBook with the M1 chip has a longer standby time, and within the limited power consumption, the performance is higher than Intel’s past products. This proves the promise of Arm CPUs in the computer market.
The opportunities brought about by technological change are global, not limited to China, and not limited to startups.
Before the successful products of Amazon and Apple, there have been many years of trying to use Arm on servers and computers, and participants include Qualcomm, AMD, Marvell, etc.
With the Griviton and M1 milestones, there has been renewed confidence in Arm’s forays into servers and desktops. Qualcomm reached a cooperation with Microsoft in May last year to develop Arm CPUs that support Windows systems. Obtaining operating system support is the key to the success of computer CPUs. In April of this year, Qualcomm acquired Nuvia, a company that makes Arm computer CPUs, for $1.4 billion, a new company established in 2019.
Earlier in 2018, former Intel president Renee James founded Ampere Computing, which specializes in Arm server CPUs. The company announced last year that it had signed contracts with Microsoft Cloud and Tencent Cloud.
In the Chinese market, new CPU companies have emerged in batches, which is also related to Sino-US technology competition. It has brought favorable policies, capital enthusiasm, talents and most importantly market demand to the venture capital activities of large chips such as CPU.
Since the mid-1990s, China has been trying to develop its own CPUs, mostly universities or state-owned enterprises. In more than 20 years, companies such as Godson, Feiteng, Zhaoxin, and Haiguang have been born. They mainly serve the Xinchuang market and are not large in scale. Feiteng’s 2021 revenue is 2.2 billion yuan. In contrast, Intel and Qualcomm’s fiscal 2021 revenue was $74.7 billion and $33.4 billion, respectively.
However, after 2018, the technology competition between China and the United States has gradually escalated, and a group of Chinese cloud computing, mobile phone and computer companies began to want to support the local chip supply chain. This is a vast space different from the Xinchuang market.
The severe sanctions imposed by the United States on Huawei have forced the high-end chip personnel trained by Huawei HiSilicon for many years to find another way out. This has injected talent into big chip entrepreneurship.
At the same time, the Chinese government began to vigorously support hard technology entrepreneurship. In 2017, it established a large integrated circuit fund with a total amount of over 300 billion yuan; in 2018, it announced the establishment of the Science and Technology Innovation Board. This is good for tech companies to get a return on capital.
Since last year, the Internet platform economy has been affected by anti-monopoly and some new industry regulations, and there are no longer many investment opportunities. The dollar funds that originally invested in these fields and the strategic investment of large Internet companies have also flowed into the hard technology industry.
The fiery GPU (Graphics Processing Unit, image processor) financing is an example. Similar to CPU, GPU was originally a field with many giants and a relatively stable structure. Nvidia and AMD are two companies, occupying most of the market. However, the bifurcation of the Sino-US industrial chain has convinced the market that China may grow its own large-scale GPU company. Last year, five major GPU start-ups: Biren, Moore Thread, Muxi, Tianshu Zhixin, and Denglin raised a total of more than 4 billion yuan.
Winner takes all, fierce competition
An investor who has seen several Arm CPU projects since last year said that they finally decided not to invest in any of them. He believes that these companies are all developed based on the Arm IP public version, and it is difficult to differentiate.
An investor in the chip field described the situation after these companies developed products: “After 2 or 3 years, the chip is made, you put one, I put one, he put one, can you make money like this? Finally? We can only compete on price, without core competitiveness.” He believes that the development process of Kunpeng 920/930 and Yitian 710 has cultivated a group of people who can make Arm server CPUs, and at least “ten teams” can be found in China, “too great” too much”. Some entrepreneurs bet that they can do it, others can’t, and he thinks it’s a fluke. The investor said that they will still make a shot in the CPU field, but need to carefully select the team to find companies with special competitiveness in terms of architecture, software and hardware matching or core optimization.
CPU is also a market that giants will not give up. The number of large companies joining the battle is increasing, and their investment is becoming more and more aggressive.
In the computer CPU market, as mentioned above, Qualcomm has reached a cooperation with Microsoft, and Qualcomm operates an Arm CPU chip similar to Apple’s M1 to serve computers using the Windows operating system. This is a new growth point for Qualcomm, the leader in mobile phone CPUs. The new Qualcomm will compete in this field with the original leader Intel and AMD, whose market share continues to rise.
In the server CPU market, Nvidia, which is known for its GPU, is also planning to launch a CPU to realize the “CPU+GPU+DPU” overall data center solution envisaged by Huang Renxun. Nvidia had wanted to buy Arm for $66 billion to supplement its technology and product capabilities in CPUs. Although the deal was suspended in February this year due to opposition from many governments and most chip companies, Nvidia has announced that it will enter the CPU market by 2023.
AMD, which has both CPU and GPU product lines, is also trying to expand its differentiation advantages. Their server CPUs can be optimized together with their own server GPUs to improve overall performance. According to a report from Mercury Research, AMD has achieved 12 consecutive quarters of market share growth in the server CPU market through the first quarter of this year.
For all chip companies, the bigger challenge in the server market is that cloud computing giants, one of the big buyers, are developing their own CPUs. This includes Amazon AWS and follow-up Huawei, Alibaba and Google. The four cloud computing companies mentioned above had a combined global market share of more than 60% last year. If each company’s self-developed products can satisfy their own use, it means that more than 60% of the cloud computing server market will not be open to third-party chip companies. Worse, they may also sell CPUs to the outside world and become potential competitors to chip companies, just as Samsung uses chips in its own phones and sells them to the outside world.
These new Chinese CPU companies are in the very early stages of developing products. The first shuffling point in the industry will appear in the stage of testing and verification for target customers after the first batch of CPUs are taped out. At this hurdle, companies that can obtain mass production orders will be directly shortlisted for the follow-up competition. Among the companies that cannot successfully obtain customers, only a few have the money to try a second time. Most of these new companies began to invest in research and development at the end of last year and early this year. According to the normal rhythm, the reshuffle will occur in the second half of 2024 at the earliest.
To get past this first hurdle, companies are hiring at unprecedented salaries. Recruitment information shows that this chip offers a monthly salary of 30,000 to 60,000 to senior IC verification engineers, and Qilingxin gives 60,000 to 90,000. A CPU/SoC performance modeling engineer who has worked for 3-5 years can get at least 1.12 million annual salary in Qilingxin. This is at least 3 times higher than the industry level before the chip boom.
In the past, the CPU market structure was winner-take-all. The first place may eat up 70 to 80% of the share, and the second place has room to survive. The next company will either die out or be acquired. But the rewards for the winners are also extraordinarily enticing. Intel, AMD, and Qualcomm are all tech giants with a market value of over $100 billion.
An investor who has invested in an Arm CPU company told “LatePost” that in the field of large chips including CPU and GPU, those who have not invested will feel that there are many giants and a long market cycle, and those who have invested will think that domestic alternatives Unstoppable, and it all makes sense. The bigger the opportunity, the more controversial it is, and the smaller the opportunity, the easier it is to reach a consensus. “The history of science and technology development has been like this for decades, and the final result speaks for itself,” he said.
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