Macroeconomic factors and changing investment strategy have taken their bites on China's semiconductor startups. As Financial Times reported, weakening market demand, especially in the consumer sector, has changed investment strategy, hitting Chinese startups in the process. In 2020, approximately 23,100 semiconductor companies were founded, while 1,397 chip companines closed. While 2021 saw the creation of 47,400 new semiconductor companies, the number of shutdown also rose to 3,420. Between January and August 2022, it is estimated that 3,400 Chinese semiconductor companies ran out of business.

Like elsewhere, semiconductor talent is in short supply in China. China Semiconductor Association indicates that the shortage of IC-related talent will exceed 250,000 this year before reaching 300,000 by 2025. As the chip industry sought to address the issue by lowering the entry barriers by recruiting under-qualified personnel, it only added to the problem, reported Financial Times. Meanwhile, geopolitical and pandemic concerns are also deterring professionals with overseas experiences from relocating to China. As startups streamline their operations, talent shortage is exacerbated.

The pessimistic outlook forms a sharp contrast with development in 2021. In a boom market fueled by chip shortages, last year saw global semiconductor startups receiving a record US$19.4 billion in funding from VC firms and governments, according to S&P Global Market Intelligence. In VC funding alone, Crunchbase data suggested that global semiconductor startups received more than US$6.4 billion in VC funding in 2021, surpassing the US$3 billion total funding received in 2020.

Nevertheless, it remains to be seen how the changes will be reflected in numbers. Amid a worldwide decline in VC funding, Nikkei Asia reported that venture funding in China fell to US$9.1 billion in second-quarter 2022, half of first-quarter 2021's US$18 billion. In fourth-quarter 2021, the figure was still US$32 billion. However, data from China's JW Insights also indicate that Chinese chip startups raised approximately US$8.78 billion in the first half of 2022, representing a 57% year-on-year growth, with Series A funding having the highest proportion.

By DIGITIMES