E-86: Asia To Become Chip Manufacturing Powerhouse

During a gold rush, wise sell shovels.?

That’s probably why many Asian countries are setting aside hefty sums to boost their semiconductor industries. After all, in the AI era, large language models or LLMs—the engine behind chatbots like ChatGPT— are pure gold, and the chips that power them are the shovels.?

For instance, China has just launched a US$47.5 billion fund to boost its semiconductor sector. The country is the world’s largest consumer of semiconductors and fifth-largest semiconductor manufacturer trailing behind Taiwan, South Korea, Japan, and the US.?

This is China’s third such state-back fund and it outsizes the previous ones. The first one, set up in 2014, was worth US$19.1 billion, while the second fund was launched in 2019 with a US$28.2 billion investment.?

In the latest fund, China’s Ministry of Finance is the leading shareholder owning 17%, while China Development Bank Capital is the second-largest shareholder with a 10.5% stake.

China used the last two funds to finance domestic chip foundries like Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor. Now the third fund will focus big on chip manufacturing equipment.?

Meanwhile, South Korea this week announced a US$19 billion support package for its chip industry. The big agenda behind it is to boost chip design and contract manufacturing in the country while aiding infrastructure and research in this field. The fund will also support small and medium-sized companies in this space. Moreover, the South Korean government is building a mega chip cluster just outside Seoul, which it says will be the world’s largest semiconductor-making complex and create millions of jobs.

Back in Southeast Asia, the Malaysian government has also revealed an intention to allocate US$5.3 billion over the next decade to establish itself as the global chip hub. The funds will be supplied by Malaysian sovereign wealth funds such as Khazanah Nasional.?

The plan includes training 60,000 local engineers and establishing at least 10 local companies in design and advanced packaging for semiconductor chips, with revenues between US$210 million and US$1 billion. This is one part of its recently unveiled National Semiconductor Strategy. The other part involves attracting US$107 billion in investments for its semiconductor industry from domestic and foreign companies.?

Then there is Japan, which has been doing everything it can, to make a big comeback in chip manufacturing. Asian states are indeed going all out to grab the emerging semiconductor opportunity. South Korean President Yoon Suk-yeol, puts it aptly.?

“Semiconductors are a field of national all-out war,” he said while announcing the AI package. “Winning or losing depends on who makes the state-of-the-art semiconductors with high information processing capabilities first. The state must provide support for semiconductors so that they do not lag behind competitors.”

On that note, let’s dive into this week’s recap.

Betting Big on AI?

This week, many big names across the globe bet big money on the latest AI wave. They expect it to be a game-changer rather than a short-term phenomenon.??

Source Code Capital, an early backer of Bytedance, the Chinese juggernaut and owner of TikTok, is reportedly setting up a US$300 million AI-focused venture fund. Although the size of the fund is yet not finalized. Currently, the Beijing-based investor holds roughly US$5 billion across its yuan and dollar funds. If successful, this will be its first major investment vehicle since early 2021.?

The development comes at a time when VC fundraising has yet not rebounded completely, which means investors’ interest in AI is rising rapidly.

For instance, in Southeast Asia, quite a few venture capitalists are eyeing AI deals. As per the data collated by Tech In Asia, Antler is the most active investor in the regional AI startups, followed by Iterative. Over the past 24 months, Antler has cut checks for 30 AI startups, while Iterative has written 15.?

Beyond Asia, Luxembourg-based Alpha Intelligence Capital, the backer of prominent AI companies including OpenAI, is reportedly raising a US$250 million fund from government-owned entities of France and Singapore as backers, including Temasek and others.?

Parallelly, in an eye-popping development this week, Elon Musk-founded AI startup xAI raised a US$6 billion Series B round from Valor Equity Partners, Vy Capital, and Andreessen Horowitz, among others. Barely a year-old xAI developed Grok, an LLM trained on the data from X (formerly Twitter), which is a rival to GPT4, the LLM behind ChatGPT.?

What Stood Out This Week

New Horizons: Singapore-headquartered fintech firm Aspire has expanded to Hong Kong after securing a Money Service Operator license from its regulators. Founded in 2018, Aspire has raised over US$300 million in funding from Sequoia, Lightspeed, Y Combinator, Tencent, and PayPal, among others. The company, present in Singapore, Indonesia, Vietnam, Thailand, and the Philippines, plans to double down on Southeast Asia and Asia Pacific to tap customer demand.?

The Biggest Challenger: Indonesia is looking into the possible anti-competition practices by e-commerce giants Lazada and Shopee. This rings alarm bells for China’s Alibaba, the parent firm of Lazada, and Singaporean giant Sea Group, the owner of Shopee, which are fighting tooth and nail to get the bigger pie of the e-commerce market in Southeast Asia’s biggest market.

As per the Indonesian Competition Commission, Shopee’s algorithm reportedly prioritizes its in-house logistics service Shopee Express as well as its logistics partner J&T Express. As for Lazada, the regulator alleges it carried out potentially discriminatory actions that prevented competition and may have been detrimental to consumers.?

Convertible Bonds For Capital: Chinese internet giant Alibaba is looking to raise US$4.5 billion from the sale of convertible bonds, maturing in seven years. This comes just as its rival JD.com sold US$1.75 billion worth of bonds that can be converted into Chinese e-commerce retailer’s equity in five years.?

Alibaba’s offering includes a greenshoe option that could increase the size of the deal by US$500 million. The company will use the proceeds from the bond sale to fund stock buybacks, which might help the company boost its share price and subsequently recover the market share it lost due to the crackdown by Chinese authorities.?

Emerging Opportunities: American chip manufacturing giant Nvidia has partnered with Singapore-based ecosystem builder Tribe and government-linked Digital Industry Singapore to launch Southeast Asia’s first AI startup accelerator Ignition AI Accelerator.?

The newly formed accelerator, which is currently accepting applications, has US$3 million in its kitty to support AI startups and create a vibrant AI ecosystem in the region. Through a four-month initial program, 15 startups will gain technical insights from Nvidia and attend training workshops developed with Tribe. The select startups will also get funding support under the Startup SG Tech scheme.?

Buzzing Deals

? Philippines-based climate-tech startup Humble Sustainability received fresh funding from Asia-focused venture capital firm Gobi Partners. Other backers include the Philippines’ National Development Company, Double River Impact, and Equitrust Holdings. The funding size remains undisclosed. The startup last raised a US$750k seed in 2022.

Humble Sustainability helps companies sell their old IT equipment instead of throwing it away. Currently, it has a network of 75 firms which it works with. The company will use the funds to expand its operations in the country.?

? Philippines-based fintech firm Beppo raised an undisclosed pre-seed funding round from Wavemaker Partners and other angel investors. Beppo helps SMEs digitize and automate their accounting and tax compliance through its optical character recognition software that captures data from receipts and other printed documents.

With the fresh funds, beppo has acquired its local rival JuanTax along with five other bookkeeping firms. Beppo will use this money to expand in the country through partnerships.?

? Singapore-based design studio Mighty Jaxx secured an additional US$11 million in an extension of its series A+ round led by Sunova Capital and East Ventures. In March 2022, the company bagged US$20 million in the first close of the round at a valuation of over US$200 million.

Mighty Jaxx creates limited-edition collectibles in partnership with well-known companies such as Nickelodeon, Warner Brothers, and Netflix. The company will use the funding to scale up its business in the US and Europe this year.

? Singapore-headquartered financial services startup Honest Bank received an additional US$2.5 million in its ongoing Series B funding round from Rakuten Venture and Jetha Global. This follows an earlier investment of roughly US$19 million from Japanese firm Orico in 2023, as part of the same funding round.

Founded in 2019, Honest Bank's core product is the Honest Card, a credit card available in both physical and digital formats, catering to the Indonesian market

? South Korea-based cloud security and digital transformation company Chequer closed its strategic round at US$27.82 million with investors like Shinhan Venture Investment and Salesforce Ventures.

Founded in Silicon Valley in 2016, Chequer runs the cloud security solution QueryPie. With the new funds, QueryPie plans to expand its presence in Korea and Japan as well as venture into Southeast Asia by 2025.?

? Taiwanese luxury marketplace PopChill 拍拍圈 bagged an additional US$1.3 million in its pre-series A round from Top Taiwan Venture Capital. This increases the round’s total to US$3.1 million and pushes up the company’s total raise to US$6.2 million to date.

The company counts three of Japan’s top 10 luxury resellers and several Taiwan and Hong Kong-based suppliers as partners and offers 100,000 items on its platform. PopChill will use the funds to enter a new market this year, with Singapore as its primary target.?

And that’s the wrap for this edition of #ICYMI, our weekly curated highlights from the Asian tech ecosystem. Subscribe to receive it every Thursday and stay updated on the noteworthy tech developments you might have missed during the week. Like this newsletter? Share it with your friends and colleagues here.