BYD Semiconductor secures $265 million in outside investments

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BYD Semiconductor secures $265 million in outside investments.
Image: BYD

BYD Semiconductor, the microchip manufacturing division of battery-powered transport concern BYD, secured ¥1.9 billion ($265 million) in outside funding last week. Sequoia Capital China Fund, SDIC Fund, CICC Capital, and 11 other investors received 20.2 percent equity interest in the subsidiary for their cash infusion.

The corporation made the sale to acquire the capital necessary to make its microelectronics unit a greater revenue producer.

Why BYD Has A Semiconductor Unit

Founded in 1995, BYD is a leading maker of rechargeable batteries for smartphones, electric bikes, and battery-powered vehicles. As the firm grew into a billion-dollar multinational, it expanded into automobile manufacturing in the early 2000s. Thanks to its investments in emerging technologies and robust production capability, the corporation has become China’s biggest electric vehicle maker.

To facilitate the production of its battery-powered automobiles, the firm established a semiconductor arm to fabricate certain essential electric vehicle parts. As such, BYD is one of the few Sino companies capable of manufacturing its own critical electric vehicle components, like insulated gate bipolar transistors (IGBTs).

By maintaining its own chip production unit, the firm ensured it always has adequate supplies of crucial parts. The division also allowed the corporation a degree of protection from international supply chain disruption. In the post-COVID-19 era, the subsidiary might act as a major income generator for the larger enterprise.

Business Saving Pivot

The coronavirus pandemic has had a significant deleterious impact on all industries, the automotive sector included. A recent report from IHS Markit states global light vehicle sales will decline by 22 percent in 2020 year-over-year. As a result of that trend, BYD revealed its net profits would fall by 79.99 to 93.33 percent in the first quarter.

Consequently, the Sino conglomerate is working on expanding its microelectronics manufacturing unit to compensate.

Last month, the corporation announced plans to turn BYD Semiconductor into a publically traded company. In preparation for the transition, the subsidiary acquired a pair of component makers to expand its light-emitting diode and intelligent photoelectric parts portfolio. The firm also sold off one-fifth of its equity to fund talent acquisition, asset purchases, and footprint expansion.

As China is pushing to establish its chip-making self-sufficiency, BYD’s diversification push is well-timed. Recently, Beijing’s semiconductor independence push has prompted a rise in international commerce tension that is disrupting Sino tech companies’ supply chains. Consequently, BYD’s in-house microelectronics production capability gives it a market advantage that will appeal to outside investors.

New Times Securities estimates the Sino electric vehicle IGBT market alone will be worth ¥30 billion ($4.2 billion) by 2025. As such, BYD Semiconductor’s forthcoming listing on the Hong Kong Stock Exchange will likely be well received. Therefore, the corporation’s ability to quickly pivot will allow it to remain operational despite unprecedented market challenges.

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