China dominates chip startup funding, leaving US far behind.

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TLDR: China led the funding of chip startups in 2023, receiving 75% of all venture-capital funds in firms doing chip design, making chips or chip equipment, while US companies only got about 11% of VC chip investment.

A report by PitchBook revealed that China received the majority of venture-capital investment in chip startups last year, far surpassing the US and the rest of the world. Chinese startups received 75% of all funding in companies involved in chip design, chip manufacturing, or chip equipment. In contrast, US companies only received 11% of venture-capital investment for chip-related ventures.

China’s dominance in chip startup funding can be attributed to its prioritization of investment in the sector. In September 2022, China launched a $40 billion fund dedicated to supporting the chip industry, marking its third major state fund aimed at bolstering the sector. Meanwhile, the US passed the CHIPS Act in August 2022 to revitalize its chip industry, but obtaining funding through this act has proven to be more complex than acquiring funding for clean energy initiatives.

This discrepancy in funding has raised concerns about the competitiveness of the US chip industry. With China’s heavy investment in the sector, there is growing worry that it could overtake the US in terms of chip manufacturing and technological advancement. The US has taken steps to counter this, such as implementing new rules for cloud companies to limit China’s access to AI technology and blocking China from benefiting from a $52 billion chip funding initiative.

Overall, China’s significant investment in chip startups demonstrates its commitment to becoming a global leader in semiconductor technology. The US, on the other hand, faces challenges in securing funding and maintaining its position in the industry. As the global chip market continues to grow, the competition between China and the US will intensify, making it essential for the US to find new ways to support its chip industry and foster innovation.

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