Cambricon Technologies, Potential Challenger Of Nvidia, Still Has A Long Way to Go

Unlike the deceitful overrated valuation among AI industry in China, the valuation of Chinese AI Chip company Cambricon Technologies' more than 16 billion yuan (about $2.5 billion)  is substantiated. According to data submitted in June 2018 by China Merchants China Direct Investments Limited (CMCDI) to the Hong Kong Stock Exchanges (HKEX), a CMCDI subsidiary invested nearly 40 million yuan in Cambricon Technologies, securing a  0.246% share.

The series B round funding of Cambricon Technologies attracted lots of investors, including China's State-owned Capital Venture, SDIC Venture Capital, China Capital Investment Group, TCL Capital, CITIC Securities, Alibaba VC, Lenovo Capital & Incubator Group. As an Incubation project of Chinese Academy of Sciences (CAS), the national scientific think tank of State Council, Cambricon Technologies is well trusted and fully supported by state-owned capital. The fundraising event happened during the time when ZTE was sanctioned and banned by American authority.  China is very keen on developing its own chip industry and Cambricon Technologies is one of the primary players in this new arena.

CHEN TianShi, Cambricon technologies' founder and CEO, enjoys considerable investor confidence along with high expectations. During their first product conference in November 2017, Cambricon released the new generation Cambricon Technologies A1 series along with the AI system software platform Cambricon Neuware. CHEN TianShi set a  goal to reach 30% market share of China's high-performance smart chip market and to have one billion smart devices integrating Cambricon Technologies ' processors worldwide in three years.

Cambricon Technologies finished $100 million A round funding in August 2017, with Lenovo and Alibaba was the leading investors. This made Cambricon Technologies the first AI chip unicorn to surpass $1 billion valuation mark. During the following month, the long-rumored Kirin 970, Huawei's first mobile AI computing chip partnership with HiSilicon, was unveiled., The IP inside the Kirin 970 is Cambricon-1A. Mate 10, the first Huawei AI smartphone was launched in October 2017 Powered by Kirin 970 and AI-accelerated by Cambricon Technologies, Cambricon-1A Mate 10 sold more than 10 million worldwide. CHEN TianShi regards the partnership with Huawei as one of Cambricon Technologies’ biggest development achievements, though Huawei does not share this perspective.

Cambricon Technologies debuted two processors in May 2018, Cambricon 1M for terminals and Cambricon MLU100 for cloud computing. Two business partners, the ThinkSystem SR650, a cloud intelligent server by Lenovo and the latest series product of Phaneron by Sugon, adopted the MLU100 processor. Lenovo and Sugon,  are in fact investors in Cambricon Technologies. CHEN TianShi is still looking for more business partners in order to conjointly construct a new vision for China’s AI industry.

Nvidia, one of the biggest winners since the dawn of AI gold rush in 2016, has gained and consolidated its advantage by forming a wide variety of partnerships over the years.. As early as 2016, the year of Cambricon Technologies was founded; Nvidia had already reached agreements with IBM, Microsoft, National Cancer Institute and the US Department of Energy, to use its AI capacities powered by AI software CANDLE (Cancer Distributed Learning Environment) and the NVIDIA Deep Learning Institute. In May 2017, Nvidia announced a partnership with Toyota in which they would use Nvidia's Drive PX-series artificial intelligence platform to develop its autonomous vehicles. In July 2017, Chinese search giant Baidu, announced that Nvidia's Drive PX 2 AI will be the foundation of its autonomous-vehicle platform. In the past two years, Nvidia’s stock has tripled with market value surpassing $120 billion.

Although regarded as a potential challenger of Nvidia after its B round fundraising, Cambricon Technologies is still facing many steep challenges; especially in light of losing Huawei’s partnership. During the Huawei Connect Conference 2018 held in October, XU Zhi Jun, rotating chairman of Huawei, introduced its new Da Vinci AI architecture and new Ascend family of chips Ascend 310 and Ascend 910; both of which were developed by Huawei itself.

“Cambricon's IP is quite good, but it is insufficient as we require chips that can support all AI application scenarios. We want to have a system that can provide both massive computing capacity and extremely low-power consumption”, XU ZhiJun said.

Chinese tech giants are pursuing the development of their own chips. Xiaomi, one of the leading electronics company in China, revealed its Pinecone chip in February 2017. Alibaba, the most valuable tech company in China, also an important investor of Cambricon Technologies, formally established a semiconductor subsidiary called Pintouge in September 2018. With the exception of Nvidia, other international competitors Intel, Qualcomm, Arm, all have an established reputation and a vast partnership network.

"There are differences between tailor-made AI chips and general ones. To some extent, it is like comparing kitchen knives to Swiss Army knives," CHEN TianShi has used this metaphor several times when talking about the advantages of Cambricon Technologies. "Swiss Army knives are multifunctional, but they are not as good as kitchen knives when chopping meat". But as XU ZhiJun said, most potential partners need chips that can support all AI application scenarios. Cambricon Technologies is still in the process of developing general chip.

DeePhi Tech, a Chinese AI chip startup that amassed nearly $100 million worth of investment capital after its third round of funding, was acquired by Xilinx in July 2018. Although their technology was good, their marketing strategy left much to be desired. As for Cambricon Technologies, its revenue in 2016 had already surpassed 100 million yuan, with more than $300 million investment together. As of now, with less than 500 employees, it is fair to surmise that they are financially viable.

“Over the past two years, I think my work has been effective, at least my shareholders have no intention to force me to resign”, CHEN TianShi, CEO of Cambricon Technologies, commented in October 2018.