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KEY STAT | Huawei’s previous partner Cambricon to become China’s first AI chip stock

Cambricon, the AI chip manufacturer behind Huawei’s smartphones, is expected to raise USD 3.6 billion in a STAR Market IPO.

Alibaba-backed (NYSE: BABAHKEX: 9988) chipmaker Cambricon Technologies is to become China’s first AI chip to go public as it sets a price for a STAR Board public offering, generating a total market cap of USD 360 million by selling 40.1 million shares.

Building core processor chips for intelligent cloud servers, terminals, and robots, Cambricon is widely known as the neural processing unit (NPU) maker for Huawei’s Kirin 970 and 980 smartphone chipsets, which were used in previous Huawei releases like the Mate 20 and P30 series.

As one of the world’s largest smartphone brands by shipments, Huawei has bolstered Cambricon’s product sales and revenue in 2017 and 2018—more than 98% of the startup’s revenue was from the sales of intellectual property (IP) licensing of the architecture—such as the terminal intelligent processers it developed—in that period.

Cambricon chips have been used to power nearly 100 million smartphones, according to a South China Morning Post report citing the Chinese Academy of Sciences.

But in 2019, IP licensing revenue fell off a cliff as Huawei ended its cooperation with Cambricon and developed its own AI chip module dubbed DaVinCi. Cambricon thus shifted its main source of revenue to an “intelligent cloud computing integration system”, as revealed by its prospectus.

Revenue breakdown of Cambricon, Huawei's previous partner

Although four-year-old Cambricon mounted losses totaling USD 230 million from 2017 to 2019, it has collected USD 200 million in six rounds of fundraising from a series of state-backed funds like China Merchants Capital and China State Capital Venture Capital Fund.

After its Series B round in 2018, in which Alibaba investment participated, Cambricon hit a valuation of USD 2.5 billion to become the most valuable AI chip startup in China.

In the next few years, the size of China’s AI chip market will maintain a growth rate of 40-50% and reach USD 1.1 billion by 2024, said a Foreward Research Institute’s research report.

Fundraising in China's AI chip sector