Smartphone manufacturer Xiaomi is expanding its investment in the chip field. Analysis of business data shows that from 2019 to March 2021, Xiaomi bought or substantially increased its holdings of at least 34 Chinese companies in the chip field. In addition to the chip field, Xiaomi has also increased its holdings of nearly 25 other technology hardware companies. These companies include not only chip developers and chip equipment manufacturers, but also start-ups and manufacturers in the advanced display, camera lens, and automation and precision equipment industries.
Xiaomi Pays More Attention To Self-Developed Chips
Xiaomi is a rising star in China’s science and technology field. And its global smartphone market share is comparable to that of Apple. The company’s investment in chips and other technological hardware is mainly carried out through a subsidiary called Hubei Xiaomi Yangtze River Industry Fund Partnership. This subsidiary of Xiaomi was established in 2017 with a registered capital of RMB 12 billion ($1.84 billion), but it was basically dormant in the first few years. Its main shareholders include subsidiaries of home appliance manufacturer Gree and other investment institutions. According to the data analysis of the market platform, Hubei Xiaomi Yangtze River Industry Fund invested in six chip-related companies in 2019.
Last year, this number rose to 22. Many of these companies already supply other leading technology companies such as Xiaomi, OPPO, Huawei and Samsung Electronics. As of March 29, 2021, Hubei Xiaomi Yangtze River Industry Fund has invested in 6 local chip developers this year.
Xiaomi said that its chip development strategy launched in 2014 has begun to bear fruit. On March 30, Xiaomi released an internally designed image processor chip Surge C1, which was used in its first foldable smartphone. At the same time, Xiaomi also released a series of new devices.
“… We have been on the chip road for 7 years. The Surge C1 is a small step in the road of Xiaomi chips, a milestone in Xiaomi’s imaging, and it carries our more ambitious technological pursuits and dreams.” Then Lei Jun adds, “This road is long and we are in awe. And this road is full of dangers. But what Xiaomi never lacks is patience and perseverance.”
Other Chinese Companies Heavily Invest In Chip Development As Well
Since last year, many Chinese companies have made similar efforts in chip development.
In the past year and a half, Huawei has invested in more than 20 chip-related companies to fill the gap in the supply chain in the future. OPPO, the world’s fourth-largest smartphone manufacturer, has recruited many veterans in the industry from suppliers and competitors such as MediaTek and Huawei to develop its own chips. The automaker Geely plans to implant its own core chips in cars as early as 2023.
Internet companies Alibaba and Baidu have also entered the field of chip design and development. Both released their own artificial intelligence chips.
Analysts said that Chinese technology companies have realized the necessity and challenges of independent research and development of chips.
Nomura Securities analyst Teng Zhean said: “China has a huge market that can provide development space for the local chip ecosystem.”
Teng Zhean said that a more likely way for China’s large technology companies to develop in the chip field is to produce some of their chips by themselves, but not all of their core chips. “It is unrealistic for any company to take care of everything and use chips developed entirely by itself… This will consume too many resources, and the market risk is too great.”
Which Chip-Making Companies Xiaomi Has Invested In?
Nevertheless, Xiaomi’s initiatives in power management, graphics and image processors, base stations, Wi-Fi, sensors and microcontrollers have revealed its ambitions in the chip field.
Several of the company’s investments have recently been listed or are planning to go public. Hengxuan Technology, a Bluetooth audio chip company, was listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange last year; Telink Microelectronics, which develops customized chips for Internet of Things devices and Intel as one of its major shareholders, is planning to go public.
Xiaomi also invested in Jingshi Intelligent, an artificial intelligence chip development company focused on video surveillance and edge computing technology, and Xi’an Zhiduojing Microelectronics, which develops field programmable gate array (FPGA) chips. The technology of this programmable chip is currently in the hands of Intel and Xilinx.
This round of investment by Xiaomi comes at a time when the company’s position in the global smartphone market continues to rise.
An analyst from Isaiah Research, a market research firm, said: “We expect Xiaomi’s smartphone shipments this year to catch up with Apple’s for the first time. For all these major technology brands, whether through internal investment, or (by increasing) future external investment, building your own chip capabilities is a natural thing… After all, chips are the core of all electronic devices and the best way to differentiate them from competitors.”
Xiaomi briefly surpassed Apple in smartphone shipments in the third quarter of 2020. Also, it squeezed Huawei out of the top three in the world in the fourth quarter of last year.
According to data from Canalys, despite the overall decline in the global smartphone market, smartphone shipments in the Chinese market in 2020 will still reach 146.4 million units, a year-on-year increase of 17.5%.