China's semiconductor investment landscape continues to cool down, returning to a normality where investors have become more discreet and valuation is more driven by rationality, according to China-based market research firm JW Insights.
In March 2023, 32 financing activities were recorded in China's semiconductor industry, marking a 43% year-on-year decline and a 7% rise compared to February, according to JW Insights.
It is estimated that a total of CNY2 billion was raised during March, a 72% year-on-year decline and a 60% monthly decline. As the research firm indicated, in first-quarter 2023 alone, the Chinese IC design sector has seen a 44% year-on-year reduction in investment activities, seeing 35 financing events compared to 63 in first-quarter 2022.
While the investment landscape of the Chinese chip industry saw a boom in 2021, signs of a cooldown already surfaced as 2022 drew to a close. Starting from the second half of 2022, Chinese semiconductor upstream began to feel the impacts of the cooling consumer demand. Along with the global semiconductor industry in general, the Chinese chip industry has also been challenged by inventory clearance. First-quarter 2023 continues to see weak demand in smartphones and computers.
In 2022, the investment in the Chinese semiconductor industry primarily focused on analog ICs, logic ICs, semiconductor materials, and semiconductor manufacturing equipment. The four sectors accounted for about 45% of the total investment received by the Chinese semiconductor industry. Semiconductor testing equipment particularly became a focus, amounting to 45% of total investment activities in the equipment sector, JW Insights indicated. In March, 34% of Chinese semiconductor funding activities were in Series A, and the majority of which took place in semiconductor equipment, analog and logic IC sectors.
In 2022, the global IC design sector saw US$214.4 billion in revenue, with China accounting for 15%, according to DIGITIMES Research. Despite US sanctions, Chinese chip design houses remain competitive in consumer ICs, analog ICs and power semiconductors based on 40nm and more mature process technologies.
