Enflame Technology, a Shanghai-based artificial intelligence (AI) chipmaker, recently announced it secured ¥1.8 billion ($278.5 million) in Series C capital. The startup’s latest funding round featured contributions from Chinese technology giant Tencent and two Beijing-backed banking sources.
Lindong Zhao, Enflame Technology’s CEO and founder, said his company would use its new capital to scale up its operations.
Having raised ¥3.1 billion ($478.7 million), the two-year-old business is one of China’s most promising semiconductor companies.
Tencent’s Cloud Computing Ambitions
Tencent is by far the most well-known contributor to Enflame Technology’s Series C funding round.
The conglomerate is the world’s largest video game publisher and owns WeChat, a social/payment service with over 1.2 billion users. The corporation has also recently taken an increased interest in expanding its footprint in its local cloud computing market. Its investments in the startup suggest it wants to be more competitive with Alibaba, the market’s leading provider.
Enflame Technology specializes in making components that optimize the functionality of cloud-based AI systems. Zhao noted his firm would use its new capital infusion to acquire more industrial resources to broaden the scope of its operations. He also specifically indicated his business would work with its partners to upgrade their AI resources.
As of May 2020, Tencent had a 23.2 percent stake in the chipmaker, making it the startup’s largest non-founder shareholder.
Given its ongoing support for Enflame Technology, Tencent likely wants to use its hardware to bolster its cloud computing offerings. With leading-edge technology backing its services, the corporation can gain a bigger piece of China’s $10.7 billion cloud computing market.
Beijing’s Advanced Semiconductor Plans
In addition to Tencent’s contribution, Enflame Technology’s Series C funding featured investments from two Chinese government-owned banking organizations, China International Capital Corporation (CICC) and the CITIC Group.
CICC and the CITIC Group are among the nation’s leading investment firms. The financial services companies likely view the startup and its AI acceleration technology as a good long-term bet. Beijing also recently prioritized supporting homegrown companies that are developing innovative electronic components.
The Chinese government earmarked $118 billion to foster its national semiconductor independence as part of its Made in China 2025 initiative. The nation’s leaders did this because the area does not have many domestic semiconductor chip design firms. As a consequence, it imports over $300 billion in integrated circuits every year.
Beijing’s semiconductor independence plans have become pressing in recent years due to trade sanctions issued by the United States. Huawei and Shanghai Manufacturing International Corporation, two of China’s top chipmakers, lost access to advanced American semiconductor technology following changes to Washington’s export control policies.
In light of those developments, the Chinese government probably sees significant potential in Enflame Technology. The startup has actually released viable commercial products for a rapidly emerging technology segment. Administrators probably also feel positive about the transformative impact of its domestically produced enterprise-grade technology.
For those reasons, Beijing, along with Tencent, has a big incentive to continue funding Enflame Technology for years to come.