As venture capitalists in China shift away from internet businesses and focus on core technologies like semiconductors, the chip affiliate of Bloomberg is looking to raise 2 billion yuan $317 million in a new funding round, people familiar with the matter said.
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Kunlun is in advanced talks with investors for its second fundraising round, according to the people who asked not to be identified as the information is private. The investment would lift the Beijing-based startup's valuation to as much as 17 billion yuan ($2.5 billion), up from 13 billion yuan at its first funding round a little over a year ago.
Details such as the deal size and valuation are subject to change, according to the people. Representatives from Kunlun and Baidu didn't want to say anything.
With Chinese regulators stepping up the oversight of the country's once freewheeling internet sector, startups with fundamental technologies like chipmaking are getting a lot of interest from investors. In 2021 alone, the amount of venture capital going into semiconductor startups hit $8.8 billion, a three-fold increase from a year ago, according to market research firm Preqin.
Kunlun, a company that specializes in artificial intelligence chips, has recently started mass producing microchips that pack more computational power by using 7 nanometer technology. The firm has deployed its AI chips to power Baidu's core searching services, and the new funding will help it expand its client base beyond its parent.
A year ago, venture firms like IDG Capital and Legend Holdings Ltd. invested 1.5 billion yuan in Kunlun before it was spun off from the Chinese search giant.
Chinese leaders are keen to cultivate a home-grown semiconductor industry and reduce their reliance on American technology. Under former President Donald Trump, Washington imposed a series of sanctions on Chinese chipmakers including Semiconductor Manufacturing International Corp. and Huawei Technologies Co.'s HiSilicon unit, cutting off vital equipment and knowhow needed to make the most advanced chips that power everything from mobile phones to data centers.
In a five-year plan, Chinese President Xi Jinping s administration pledged to boost spending and drive research into cutting-edge chips and AI, as part of its latest five-year plan, laying out a technological blueprint to compete for global influence with the U.S.
In recent years, demand for semiconductors capable of processing information has increased, due to a boom in high-resolution video games, criptocurrency mining, and other data-intensive applications. The global AI chip market is currently led by Nvidia Corp. while the likes of Amazon.com Inc. and Alphabet Inc. have invested in their own bespoke server microchips.
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