Chinese AI chipmaker debuts on Shanghai Stock Exchange

Chinese Artificial Intelligence (AI) chipmaker Cambricon Technology officially debut on Shanghai Stock Exchange’s Sci-Tech innovation board (SSE STAR) at 9:30 am on July 20.

Opening at an initial offer price at 64.39 yuan ($9.19) per share, the stock quickly rose by about 288% to 250 yuan ($35.70) per share, and its market value reached 100 billion yuan ($14 billion), according to a report on jiemian.com.

Since the dawn of AI chip entrepreneurship in 2014 in China, there have been more than a hundred domestic AI chipmaker launches. But regardless of them being a tech giant or a startup, they face the difficulties of carrying out businesses plans while competing with major foreign chipmakers such as Nvidia, Intel, AMD and NXP.

The Chinese chip industry has been tested in both the product market and capital markets. Since its founding in 2016, Cambricon’s high-iteration products have powered smartphones and data server chips made by Huawei Technologies Co and Alibaba Group.

In 2019, Cambricon’s main business revenue of $63 million mainly came from sales of intelligent computer cluster system (66.72%), chip and accelerator card products (17.77%), and terminal intelligent processor IP authorization (15.49%). It has become one of the few companies that have achieved large-scale applications of AI chips.

However, there are many challenges in front of Cambricon. For instance, Huawei, which used Cambricon AI modules in its phone in 2017, is now using its self-developed AI modules.

In addition, research and development of chips require high costs. Cambricon’s prospectus disclosed that from 2017 to 2019, the company’s R&D expense ratios were 380.73%, 205.18% and 122.32%, respectively. As of December 31, 2019, Cambricon had 680 R&D personnel, which accounted for 79.25% of the team.

However, the chip market has great potential. As the engine of artificial intelligence, the AI chip is the link with the highest technical requirements and added value that will play a decisive role in the development of the smart Internet. According to tech market research provider Tractica, the global AI chip market will grow from $5.1 billion in 2018 to $72.6 billion in 2025, with an average annual compound growth rate of 46.14%.

According to research and advisory firm Gartner, the global AI chip market will rise from $4.27 billion in 2018 to $32.3 billion in 2023, with an average growth rate of about 50% in from 2019 to 2023.

Therefore, Cambricon or any other chipmaker needs heavy initial investment, long-term stable cash flow, and huge sustainable investment, according to industry observers.

According to Tech Crunch, ownership of Cambricon includes SDIC Venture Capital, a state-owned investment firm approved by China’s state council, in addition to e-commerce giant Alibaba and voice-recognition company iFlytek.

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