Tech giant operates an investment fund trying to build out China’s semiconductor industry as US sanctions weigh on the company
According to PitchBook, nearly half of these investments have been made in the past six months, as the pain grows from restrictions on the company’s ability to obtain critical chips using American technology. Last month, Huawei said US sanctions slashed its 2021 revenue by about a third.
According to Pitchbook and corporate records, most of the companies Hubble has invested in are involved in the semiconductor supply chain. These include emerging players in the manufacturing and design of chips, as well as companies producing semiconductor materials, design software and chip manufacturing equipment.
Privately held Huawei did not disclose the size of its funds and Huawei declined to answer questions about it, but it has invested tens of millions of dollars in some companies, according to Tianyacha, a database that China Tracks corporate registration in Analysts say the fund allows Huawei to nurture potential current and future suppliers, while also providing potential financial returns at a time of rapid growth in China’s chip sector.
Other large Chinese electronics firms run similar investment funds that come with similar benefits, including smartphone maker Xiaomi. Corporation
, Oppo Mobile Telecommunications Corp and PC giant Lenovo Group Ltd.
“The supply chain in semiconductors is a long, long supply chain,” said Hui He, head of China semiconductor research for Omdia, a technology research firm. “When Huawei invests in a chip company, they may receive priority supply from this chip supplier, especially in the event of a shortage.”
The accelerated pace of Huawei’s chip investments comes as the Shenzhen-based company faces mounting tensions from the impact of US sanctions. Less access to all chips has slashed Huawei’s smartphone sales, eroded its market share in 5G telecom gear and paralyzed its chip design subsidiary, HiSilicon Technologies Co.
Huawei chief executive Ren Zhengfei acknowledged setbacks resulting from US operations, telling employees in August that to move forward, the company needed more “theoretical breakthroughs, particularly in domains such as compound semiconductors and materials science.” In.”
“Currently, Japan and the US are the leaders in these domains. We must leverage our global platforms to enable our success,” he said.
China has made self-reliance in chip technology a national priority, an initiative that has become critical because of a trade war with Washington that has cut many Chinese companies off US technologies. But many of its efforts have faltered, with at least six major Chinese chip-manufacturing projects failing over the past three years, Businesshala reported, including the difficulty associated with developing high-end chips and the sky-high The cost is outlined.
In 2021, as of early December, Chinese chip firms raised $26.5 billion through public offerings, private placements and asset sales, according to S&P Global Market Intelligence, up 9% from a year earlier. Those amounts follow billions previously earmarked by the government to fertilize China’s domestic chip sector.
The amount invested by Huawei is relatively low by the standards of the capital-intensive chip industry, and analysts say the company is far from self-reliant in semiconductors. Still, China’s chip boom has created a target-rich environment for the Hubble Fund, which is led by longtime Huawei executive Bai Yi. Mr Bai was one of the company’s first employees to be deported to the US during a rocky initial attempt to sell equipment to US telecommunications carriers in the early 2000s.
In 2012, Mr Bai was among a small group of senior Huawei officials who accompanied some US Congressional staff on a visit to Huawei’s Shenzhen headquarters as part of a House Intelligence Committee investigation into Huawei and a rival. The investigation concluded that Huawei’s telecoms gear posed a threat to national security – a finding that the company has repeatedly denied. In 2020, Mr Bai was named to a panel of influential Huawei executives, known as the “Representational Commission”, which was charged with approving the work of the company’s board of directors.
Mr Bai did not respond to requests for comment.
Among Hubble’s most recent investments, in early December, was Jingtuo Semiconductor Technology Co, a Suzhou-based manufacturer of specialized equipment used to keep chip components clean during production. According to Jingtuo’s website, the company “contributes to the localization of semiconductor equipment in China”.
In August, Hubble acquired a nearly $46 million stake in Xuzhou B&C Chemical Co., a company that describes itself as China’s largest photoresist, a leading semiconductor material. In June, Hubble acquired Beijing’s RSLser Opto-Electronics Technology Co. Ltd., a manufacturer of high-powered lasers used in chip manufacturing.
Jingtuo Semiconductor declined to comment. B&C Chemical and RSLer did not respond to requests for comment.
Huawei spent years and billions of dollars in its chip design capabilities, gradually displacing foreign-designed chips in its smartphones, servers and telecommunications equipment. In recent years, Huawei’s smartphone and server chips were seen by analysts and industry executives as the most advanced in the world.
However, its chips were made by outside manufacturers such as Taiwan Semiconductor Manufacturing Co.
, and US sanctions imposed on Huawei in 2020 barred TSMC and several other companies from making chips for Huawei because those suppliers use US technology.
Huawei executives say the company hasn’t laid off any chip engineers and that its employees are designing next-generation products, even though major semiconductor makers are barring them from making them.
“They are continuing their work,” Huawei’s head of public affairs, Catherine Chen, said in June. “We are confident that the difficulties can be overcome in two to three years.”
—Raphael Huang and Rachel Liang contributed to this article.
Write [email protected] . on Dan Strumpf