Semiconductor Value Chain

MediaTek, SMIC Help Form $1.7 Billion Chinese Equity Fund

26 November 2014

China's leading semiconductor-oriented venture capital fund, SummitView Capital (Shanghai, China), has announced plans to create a $1.7 billion private equity fund with the support of Taiwanese fabless chip company MediaTek, Chinese foundry SMIC and Tsinghua Holdings Corp. Tsinghua Holdings controls two Chinese fabless chip companies; Spreadtrum Communications and RDA Microelectronics.

SummitView, announced the 10 billion yuan (about $1.7 billion) fund in the context of a strategic collaboration with the Shanghai government and in cooperation with the China National Fund. As such the fund appears set to be one of the means by which the Chinese state will implement a new plan for support of electronics and semiconductors within the country.

SummitView said the fund will enable it "to acquire global semiconductor design companies and help them expand their market share in China by increasing sales, marketing activities, support and engineering, while nurturing an atmosphere of international cooperation." The acquired companies will maintain operations, research and development activities worldwide, SummitView said.

SummitView Capital has signed agreements with Chinese banks to provide 30 billion yuan (about $5 billion) of debt financing.

The fund is headquartered in Shangahi with offices in Beijing and San Francisco. The anchor investors of the fund include the Shanghai Science & Technology Investment Corp., Shanghai Jiading Investment Management Corp., Semiconductor Manufacturing International Corp. (SMIC), MediaTek Inc. and Tsinghua Holdings Corp.

Spreadtrum co-founder left to form SummitView

SummitView did not indicate how much of the $1.7 billion these anchor investors would be contributing. The firm was co-founded in 2010 by Ping Wu, who had co-founded Spreadtrum in 2001 and who served as CEO and chairman from its formation until he left the company in 2010.

The fact that SummitView is being empowered and encouraged to look outside the country is an additional layer of sophistication on the latest support plans coming from China.

The expectation is that the Chinese state will invest billions of dollars over the next ten years to support the emergence and growth of Chinese chip companies that can compete with those outside the country. The expectations is also that there will be a different emphasis and method over the next decade.

In the years from 2000 to about 2010 the Chinese state provided funds for incubators usually based at universities. This did produce a vast number of startups, as many as 500 according to some counts, but while a handful prospered many were little more than paper exercises. The suspicion was that many only survived as a means to draw down state funds and were never really serious contenders to prosper. The more successful ones were usually those founded by engineers and executives returning to China after working in the United States or elsewhere.

Now China appears to be harnessing the power of capitalism and to try and make bets on emerging and successful companies both in China and from around the world.

It is notable that CMOS image sensor company Omnivision Technologies Inc. (Santa Clara, Calif.) received a take-over bid from Hua Capital Management Ltd. that valued the company at about $1.6 billion. The group led by Hua Capital Managament (HCM) includes Shanghai Pudong Science and Technology Investment Co. Ltd., a wholly state-owned limited liability company, established directly under the Pudong New Area government of Shanghai. As of yet no decision on whether the bid is acceptable or not has been given by the Omnivision board of directors.

Related links and articles:

IHS semiconductor value chain research

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