Connect with us

Emerging Markets

China aims to shake US grip on chip design tools



Veteran engineers and high-level executives are leaving top US chip design toolmakers for Chinese rivals as Beijing seeks to break America’s near monopoly on this key segment of the semiconductor industry.

Three Chinese start-ups established since September last year were founded by or have hired executives and engineers from Synopsys and Cadence Design Systems of the US, the world’s two biggest makers of electronic design automation (EDA) tools, as such software is known.

The start-ups include Nanjing-based X-Epic, Shanghai Hejian Industrial Software and Hefei-based Advanced Manufacturing EDA Co, or Amedac, in which Synopsys owns a stake.

The push to recruit US chip tool talent comes as Washington’s crackdown on Huawei Technologies exposes key weaknesses in China’s chipmaking ecosystem, including in EDA tools, which are used to design integrated circuits, printed circuit boards and other electronic systems.

The US has long dominated the segment, with Synopsys, Cadence, Mentor Graphics and Ansys controlling 90 per cent of the global market for EDA tools. Mentor was taken over by Siemens in 2017 but maintains extensive research and development operations in the US. These four companies own much of the intellectual property needed for chip development and count the world’s top chip developers as clients, including Apple, Samsung, Qualcomm, Nvidia, Micron and Huawei.

China’s own EDA tools industry, by contrast, has been largely neglected until recently. Its two main homegrown companies, state-owned Empyrean Software, founded in 2009, and Beijing-based Cellixsoft, in 2002, are still unable to match the offerings of Synopsys and Cadence. Jinan-based Primarius Technologies, founded by a former senior Cadence executive in 2010, is likewise still struggling to catch up to its US rivals.

A wake-up call came last year when the US Department of Commerce banned Huawei, the world’s biggest telecoms equipment maker, from receiving software updates and technical support from American EDA tool makers without US approval.

This move sharply curtailed the capability of Huawei’s chip design arm, HiSilicon Technologies, as close co-operation with EDA tool providers is essential given the increasing complexity of chipmaking processes, and spurred China to act.

“We are seeing more and more people who previously worked with big US chip design tool companies joining start-ups because they think it’s a once-in-a-lifetime opportunity,” said a source from a China-based chip developer and Synopsys client. “Previously very few people would want to start up a chip design tool company because it’s a very niche market already dominated by huge players, but now they see growing customer demands for local software in China for the very first time.”

That new demand has led to the launch of at least three start-ups.

This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.

Subscribe | Group subscriptions

X-Epic, based in Nanjing, was founded in March by Wang Libin, a former vice general manager at Synopsys China, according to company data. TC Lin, former vice-president of Cadence with more than 30 years’ experience in EDA tools, joined the company as its chief scientist on August 3.

X-Epic announced in November that Tiyen Yen, another Cadence veteran, would join the company as vice-president of R&D.

Shanghai Hejian Industrial Software, founded in May, hired a high-ranking, China-based R&D executive from Synopsys in late October, according to two sources familiar with the matter. The executive worked for the US company for nearly two decades, they said.

Shanghai Hejian Industrial Software is backed by the state-owned Assets Supervision and Administration Commission of Shanghai Municipal Government and renowned Chinese venture capital firm Summitview Capital, according to online disclosures by the company.

The third start-up, Amedac, was founded in September 2019 by Chieh Ni, a former vice-president of Synopsys China who worked with the US company for 10 years. Synopsys, moreover, holds a more than 20 per cent stake in the start-up and Ge Qun, global senior vice-president at Synopsys and chairman of its China operations, is a board director at Amedac. Other key investors of Amedac include Summitview Capital and the state-owned Institute of Microelectronics of the Chinese Academy of Sciences.

Willy Shih, a professor of management practice at the Harvard Business School, said Synopsys and Cadence dominate the market because they can “lock in” their client base. Switching to an alternative provider is difficult, he said, because design tools are closely linked to existing chip process flows.

“Now China’s motivation, of course, is access for Chinese firms to these critical tools. So of course they will want homegrown tools not subject to the whims of a US administration . . . Given enough time and money, they could probably develop alternatives but it won’t be easy,” Mr Shih told Nikkei Asia.

“With the US and China locked in a prolonged tech war, the whole Chinese tech industry is aware of the significant insufficiencies in some areas (of chipmaking) and they definitely want to build their own versions of chip design software to replace current ones,” said a source at a company that works with both Synopsys and Cadence. “Synopsys knows it will lose some market share in China in the long run due to the Washington-Beijing tensions, so it wants to also hold stakes in some of these potential Chinese rivals to secure the market.”

Synopsys set up a $100m strategic investment fund for the Chinese market in 2017 to “expand engagement” with the booming Chinese chip design community — the world’s largest and fastest-growing market has more than 1,600 chip designers. The same year, Cadence decided to build a China semiconductor hub in Nanjing to better serve local clients and foster engineering talent. The company pledged to invest Rmb100m ($15.2m) in the project over the years.

Synopsys said at the time that the strategic fund, operated and managed by its China unit, was designed to collaborate with local companies and venture capital in investing in the areas of chip design, artificial intelligence, cloud-computing, software security and EDA tools.

“The China strategic investment fund is an important milestone of our China strategy and it represents Synopsys’ confidence and commitment to the Chinese market,” Chi-foon Chan, Synopsys president and co-chief executive, said in a statement in 2017.

It is not uncommon for foreign companies to forge deeper ties with local partners through investments or joint ventures to expand their presence in the Chinese market. Such ventures do not always bear fruit, however.

Intel’s venture capital arm, Intel Capital, invested in three Chinese chip-related unicorns in May, having previously paid $1.5bn for a 20 per cent stake in a subsidiary of Tsinghua Unigroup, a Beijing-based chip conglomerate. The partnership between the world’s biggest PC microprocessor maker and Tsinghua Unigroup’s mobile chip unit Unisoc to develop 5G modems ended abruptly after just one year of collaboration.

US chip developers Qualcomm and AMD also formed joint ventures with local companies to expand in the Chinese market, but these too faced setbacks.

“If companies like Synopsys and Cadence invest in Chinese partners, it is a way to stay in the market and keep those players close to them,” said Mr Shih at the Harvard Business School. “‘Stay close to your friends, stay closer to your enemies’ is one quote that comes to mind.”

In the event trade tensions die down one day, buying back stakes in their Chinese joint partners could be an option, he added.

Synopsys declined to say whether it had expanded the scale of the fund over the years or if investing in Chinese peers was part of the scope of the fund, nor did it comment on the talent exodus in China. Cadence did not respond to Nikkei Asia’s request for comments.

A version of this article was first published by Nikkei Asia on November 25 2020. ©2020 Nikkei Inc. All rights reserved

Related stories

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Emerging Markets

Bolsonaro faces investigation over election fraud claims




Brazilian politics updates

Brazilian president Jair Bolsonaro’s legal problems have multiplied after a court opened an investigation into his unsubstantiated warnings of voter fraud in presidential elections next year, a probe which could lead to him being disqualified from running.

The judicial inquiry comes as the far-right leader’s ratings are on the slide following accusations of his incompetent handling of the Covid-19 pandemic, which has claimed the lives of more than half a million Brazilians.

Rising living costs and allegations of corruption in vaccine procurement within his administration have damaged Bolsonaro’s standing further.

With political pressure building, the populist has increased attacks on the electronic voting system in recent weeks, reiterating calls for the adoption of printed paper receipts in order to avoid manipulation.

Opponents fear the former army captain is seeking to cast doubt on the legitimacy of the vote, in preparation for refusing to recognise a potential defeat. A group of 18 current and former Supreme Court justices have defended the current ballot system, which was introduced in 1996, insisting that Brazil had eliminated election fraud.

The Superior Electoral Court this week opened an administrative probe into Bolsonaro over his claims, for which he has provided no evidence. It also asked the Supreme Court to investigate whether the president had committed a crime by disseminating fake news about the voting system.

The president hit back on Tuesday. “I will not accept intimidation. I will continue to exercise my right as a citizen, to freedom of expression, criticism, to listen, and to meet, above all, the popular will,” Bolsonaro told supporters in Brasília.

The electoral court’s intervention showed the judiciary was striking back against Bolsonaro’s attacks, said Carlos Melo, a political scientist at Insper in São Paulo. “He [Bolsonaro] is harming the rules of the game, of democracy and the institutions,” he added. “It’s not different to what [Donald] Trump did, and demagogues in other countries. His intention is to question the electoral process without proof.”

Both moves by the electoral court could in theory eventually pave the way for Bolsonaro being barred from standing in the 2022 poll.

“There is a long way until this can bring actual legal consequences against the president which might affect his eligibility,” said Rogério Taffarello, a partner in criminal law at Mattos Filho and professor at the Getúlio Vargas Foundation. “[This] does not mean, of course, that the existence of such investigations cannot generate political consequences”.

The president is already the subject of a criminal investigation into whether he failed to act on warnings about alleged irregularities by public officials in negotiations over vaccine purchases. Bolsonaro and the government deny any wrongdoing.

Protesters have taken to the streets in cities over the past two months calling for the impeachment of Bolsonaro, who in polls is trailing former leftwing president Luiz Inácio Lula da Silva, also a likely frontrunner in next year’s election.

Bolsonaro had long promised to present evidence of cheating in elections, even claiming that the 2018 ballot he won was tampered with. Yet last week he admitted to not holding any proof, only “indications”.

Despite his falling popularity, Bolsonaro retains backing in Congress from an amorphous grouping of centre-right political parties known as the Centrão, or “Big Centre”. Analysts said for now this support appeared to be holding.

Additional reporting by Carolina Pulice

Source link

Continue Reading

Emerging Markets

South Korea looks to fintech as household debt balloons to $1.6tn




South Korea Economy updates

After her family business of ferrying drunk people home was hit by closures of bars due to Covid-19 curfews and social distancing, Lee Young-mi* found herself juggling personal debts of about Won30m ($26,000).

The 56-year-old resident of Suncheon in South Korea was already struggling to pay off or refinance four credit cards, but now faces the prospect of those debts rapidly multiplying after her husband was diagnosed with cancer.

“We’ve had little income for more than a year as not many people are out drinking until late into the night,” said Lee. “Now my husband won’t be able to work at all for the next three months after his surgery.”

Lee’s story is playing out across Asia’s fourth-largest economy as self-employed workers, who make up nearly a third of the labour force, have seen their incomes reduced sharply due to coronavirus restrictions. Now, after struggling for years to keep a lid on household debts that hit a record Won1,765tn ($1.6tn) in March, Seoul is looking to fintech companies and peer-to-peer lenders for answers. 

Chart showing increase in South Korea's household debt

Among them is PeopleFund, which touts tech-based investment products backed by machine learning that allow borrowers to refinance their higher-interest loans from banks and credit card companies.

The company has loaned at least $1bn to more than 7,500 customers since it was established in 2015. Its products allow borrowers to switch their debts to fixed-rate, amortised loans at annual interest rates of about 11 per cent, a change from the riskier floating rate, interest-only loans common in South Korea. 

PeopleFund has received about Won96.7bn in financing from brokerage CLSA, and along with Lendit and 8Percent is one of the first among the country’s 250 shadow banks to win a peer-to-peer lending licence. 

“The country’s most serious household debt problem is with unsecured non-bank loans, whose pricing has been too high. We can offer more affordable loans to ordinary people unable to receive bank loans,” Joey Kim, chief executive of PeopleFund, told the Financial Times.

The proliferation of digital lenders and fintechs in South Korea, where higher-risk borrowers are often cut off from bank financing, has been encouraged by the country’s government.

“We hope that P2P lenders will help resolve the dichotomy in the credit market by increasing the access of low-income people to mid-interest loans,” said an official at the Financial Supervisory Service.

South Korea’s household debt situation has become more pressing since the onset of the pandemic, with increases in borrowing for mortgages, to cover stagnating wages and to invest in the booming stock market. South Korean households are among the world’s most heavily indebted, with the average debt equal to 171.5 per cent of annual income.

South Korea’s household debt-to-GDP ratio stood at 103.8 per cent at the end of last year, compared with an average 62.1 per cent of 43 countries surveyed by the Bank for International Settlements.

Much of the new debt has been risky. Unsecured household loans from non-bank financial institutions were Won116.9tn as of March, up 33 per cent from four years ago, according to the Bank of Korea, much of it high interest loans taken out by poorer borrowers.

Getting on top of the problem has taken on national importance. In a rare warning in June, the central bank said the combination of high asset prices and excessive borrowing risked triggering a sell-off in markets and a rapid debt deleveraging.

“If financial imbalances increase further, this could dent our mid-to-long-term economic growth prospects,” BoK governor Lee Ju-yeol said in July.

The country’s economic planners, however, are struggling to contain debt-fuelled asset bubbles without undermining South Korea’s fragile economic recovery.

The government has attempted to address the danger by tightening lending rules. Regulators in July lowered the country’s maximum legal interest rate that private lenders can charge their customers from 24 to 20 per cent.

Economists caution that rising debt levels increase South Korea’s vulnerability to an economic shock. 

They also warn that the asset quality of financial institutions could be hit by a jump in distressed loans when the BoK rolls back monetary easing, expected in the fourth quarter.

“Monetary tightening is needed to curb asset bubbles but this will increase the household debt burden, holding back consumption further,” said Park Chong-hoon, head of research at Standard Chartered in Seoul. “The government is facing a dilemma.”

For Lee Young-mi, however, the 11 per cent rate offered by the PeopleFund is still too high. “I am not sure how to pay back the debt.”

*The name has been changed

Source link

Continue Reading

Emerging Markets

European and Chinese stocks rise after calming words from Beijing




Chinese equities updates

European shares chased gains in China after calls from Beijing for greater co-operation with Washington helped sooth jitters over a regulatory crackdown in the world’s biggest emerging market.

Europe’s Stoxx 600 index rose 0.7 per cent on Monday to hit new all-time highs, while the UK’s FTSE 100 rose 1 per cent led by economically sensitive stocks including banks and energy groups. London-listed lender HSBC gained 1 per cent after it reported second-quarter figures that easily beat analysts’ expectations.

The gains came after the China Securities Regulatory Commission, Beijing’s market regulator, called on Sunday for closer co-operation with Washington, stressing the country’s efforts to improve transparency and predictability after a crackdown on tutoring groups obliterated the market value of the $100bn sector’s biggest companies.

Chinese listings in the US have become a geopolitical flashpoint as Beijing has sought to exert greater control over the country’s powerful tech sector. The US Securities and Exchange Commission said on Friday that Chinese groups that sought to sell shares in America would be subject to stricter disclosures.

Shares in China rebounded after their worst month in almost three years, with China’s CSI 300 benchmark of Shanghai- and Shenzhen-listed blue-chips rose 2.6 per cent on Monday, while Hong Kong’s Hang Seng index added 1.1 per cent. The city’s Hang Seng Tech index, which tracks big internet groups including Tencent and Alibaba, reversed early losses to rise 1 per cent. Futures tracking Wall Street’s benchmark S&P 500 index climbed 0.6 per cent.

Last month, China’s cyber-security regulator announced plans to review all foreign listings by companies with data on more than 1m users after top leaders in Beijing called for an overhaul of how the country regulates initial public offerings in the US. The crackdown came just days after the $4.4bn listing of ride-hailing group Didi Chuxing.

The intensifying scrutiny of how Chinese groups access capital markets has pummelled stocks, delivering the worst month for China tech groups listed in the US since the global financial crisis. The Hang Seng Tech index fell 17 per cent last month.

“While we do not consider it prudent to completely avoid investments in China, further volatility can be expected until the first quarter of 2022, by which time we believe most regulatory changes may already be in place,” analysts at Credit Suisse wrote in a note on Monday.

Meanwhile, data released by China at the weekend showed that factory activity grew at the slowest pace in 15 months in July as demand contracted for the first time in more than a year.

Government bonds were steady with the yield on the benchmark German 10-year Bund, which moves inversely to its price, gaining 0.01 percentage points to minus 0.45. The equivalent US 10-year yield was steady at 1.234 per cent.

Bond yields have been falling in recent weeks, despite higher than expected inflation readings in the US and indications from the US federal Reserve last week that it was moving a step closer to the day when it would start tapering its $120bn in monthly asset purchases.

The euro rose 0.1 per cent against the dollar to $1.1885, while the pound gained 0.1 per cent to purchase $1.3924. Prices for global oil benchmark Brent crude fell 1 per cent to $74.66.

Unhedged — Markets, finance and strong opinion

Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here to get the newsletter sent straight to your inbox every weekday

Source link

Continue Reading