Intel Capital, Intel’s venture capital division, has joined the ranks of prominent global investors in China’s artificial intelligence and semiconductor-based ventures, even as it continues to receive massive sponsorships from Washington to fuel the tech competition with Beijing. This subsidiary of the €134 billion chip giant has an impressive portfolio, with ventures in 43 tech startups based in China. Intel Capital has backed over 120 Chinese companies since its inception in the early ’90s, according to statistics given by Crunchbase.
While many American contemporaries evacuated the market under US-authorised pressure, the fund, based on Intel’s balance sheet, has steadily supported nascent Chinese firms over the past year. It further injected funds into a £15 million funding circle for Shenzhen’s AI-Link, a platform specialising in 5G and cloud-based infrastructure, as well as directed a £70 million round for North Ocean Photonics, a micro-optics hardware producer based out of Shanghai.
Escalating geopolitical rifts between Washington and Beijing have necessitated finer analyses of personal investment networking between these tech giants as they contend for supremacy in technology and defence. This June saw the Biden government proposing legislation to limit US backing of Chinese tech with potential military uses, such as AI, semiconductor and quantum computing. This legislation is set to be ratified by the end of the year.
Intel Capital’s ventures have been pivotal in fostering support for these outbound restrictions, according to sources familiar with the new regulations under the Biden administration. These investments in China presently comprise approximately 16 AI startups, 15 semiconductor companies, and other businesses focusing on cloud services, electric vehicles, telecoms, virtual reality systems and batteries.
These very investments may be at risk of removal once the US rules are enacted, although the US Treasury is contemplating certain exceptions for some venture capital transactions. Yet investment restrictions, a slowing Chinese economy, and the lingering impact of Beijing’s crackdown on tech firms have seen the US conglomerate reduce its deal making in China over the past year and a half. Information from ITjuzi reveals that only three deals have been finalised since the beginning of 2023, leading to diminished startup values and sustainability.
A US House China committee’s February report indicated that US-based venture capital firms, contributing billions of dollars to enterprises that propel China’s “military, surveillance state, and Uyghur genocide”, had made sizeable investments. AI firms received a significant portion of the investment at about $1.9 billion, and a further $1.2 billion injection was channelled towards semiconductor firms.
The report emphasised five US venture firms: Sequoia, GGV, GSR Ventures, Qualcomm Ventures, and Walden International. However, it failed to acknowledge Intel Capital, which had grown into one of the biggest US investors in China despite competition withdrawal. As stated by a prominent American fund manager with extensive experience in Chinese business affairs, Intel’s investment activity in China heavily outweighs that of Qualcomm’s venture arm, demonstrating a diversified involvement.
John Moolenaar, the Republican leader of the House China committee, underscored the findings as a warning necessitating stricter regulatory controls. According to Moolenaar, the unwavering capitalist commitment to revenue, capitalised upon by the Chinese Communist Party, urges the implementation of robust capital outflow regulations to deter US firms from investing in ventures tied to the People’s Liberation Army. Intel Capital refrained from responding to these assertions.
While under growing political stress last year, Sequoia Capital and GGV Capital, two among the most significant US venture investors in China, divested their Chinese ventures. Qualcomm, Walden, and GSR persist in investing in budding Chinese firms.
In support of its semiconductor factory expansion, Intel secured roughly $20bn in grants and loans from the US in March. The grants, part of the largest allocation from the 2022 Chips and Science Act aimed at bolstering the domestic chip industry, will provide financial backing to Intel’s prospective US investments amounting over $100 billion for high-end chip production facilities, incorporating massive plants in both Ohio and Arizona.
Intel, an international technology company with stocks on Nasdaq, operates a substantial business in China, with approximately 12,000 employees and constituting 27% of worldwide revenue in 2023. Lenovo, a multinational corporation based in China, is counted amongst its top three chip consumers, which also includes Dell and HP, contributing to 11% of its worldwide revenue. Recently, Intel’s subsidiary in China purchased 3% stake in Luxshare, a Shenzhen-based telecommunications equipment manufacturer.
The China division of Intel Capital is under the management of Tianlin Wang, a longtime Intel personnel who has been overseeing the division since 2017. In China, Intel Capital also houses six additional investment directors. Anthony Lin, from San Francisco, heads Intel Capital worldwide, which has injected over $20bn into global businesses since the early 90s.
PitchBook data reveals that Intel Capital has been involved in Chinese start-up deals tallying up to $1.4bn since 2015. This sum pertains to the overall value of the deals and not exclusively Intel Capital’s own investment, which isn’t publicly disclosed.
In the past, Intel Capital went public with its 2014 investment of $670 million in more than 110 Chinese tech companies. In 2015 itself, it pledged $67 million to eight such firms. However, post this period, the exact extent of Intel Capital’s investments in China hasn’t been made public.
In 2023, a research conducted by the US Center for Security and Emerging Technology, a Washington DC-based policy research organisation, revealed that Intel Capital took part in 11 deals involving Chinese AI firms between 2015 and 2021, a number disputed by an insider at Intel who claims there were only four such deals. In certain instances, the American fund managed to secure a board position, including in companies like Horizon Robotics and Eeasy Tech, both of which are ventures in chip-making and AI designed for facial recognition, backed by the government of the Zhuhai province.
The report acknowledged how Intel Capital’s investments in Chinese AI companies have facilitated strategic alliances which might enhance the operations of Chinese firms in a manner that aligns with the strategies of the Chinese government.
Intel Capital once financially backed a Chinese firm that was eventually penalised by the United States. This fund supported iFlytek, an AI voice recognition enterprise, early on by acquiring a 3% stake in it in 2002. However, by 2004, they had disposed of these shares. In 2019, the US banned iFlytek alongside five other Chinese companies, accusing them of participating in alleged human rights violations in Xinjiang.
According to the leader of a competing Chinese venture business who has also co-invested with them, Intel Capital is driven by the anxiety of being left behind in the AI era. Such intense rivalry is evident within the AI sector in the US, where Intel feels the pressure to stay relevant. This has led them to search globally for investment opportunities in AI, and China presents itself as one of the limited choices available. – The Financial Times Limited 2024™.