China’s Tech Battlefront: Chip Industry Emerges as Unicorn Hotspot Amid Declining Start-up Funding

Technology battle: Chinese semiconductor sector emerges as crucial incubator for unicorns, according to a study

With declining start-up financing, investments are focused on a select few unicorns, particularly within the integrated circuit industry.

Raising capital has been increasingly difficult for start-ups globally. This has been evident in China where the count of newly funded unicorns – start-ups with a valuation exceeding US$1 billion – declined from a high of 192 in 2021, to 137 in 2022, and further down to 106 the previous year. This data was reported in the China Unicorn Enterprise Development Tracking Report, released on Sunday by Great Wall Strategy Consultants.

Even as overall investment has diminished, start-ups that successfully drew in investors saw a higher than usual level of support. The majority of funds were derived from renminbi funds. In the past year, US-dollar funds made up a mere 28 per cent of all investment deals, a decline from 35.5 per cent in 2022 and a significant drop from 50 per cent in 2021, according to the report.

A significant portion of the funding was directed towards unicorns in complex technology sectors like ICs and new energy vehicles, the report stated. This comes as the Chinese government intensifies its self-sufficiency efforts to lessen reliance on overseas technology, especially from the United States.

The report revealed that in 2023, the Yangtze River Delta in China, known as the country's industrial hub and a key area for semiconductor manufacturing, housed 40% of all Chinese start-ups valued at over $1 billion, also known as unicorns. Over the recent years, there's been a noticeable increase in unicorns emerging from cities beyond the first-tier ones such as Beijing, Shanghai, Shenzhen, Guangzhou, and Hangzhou.