Shanghai Enflame Technology (燧原科技), a Chinese AI Semiconductor company, has passed the initial public offering (IPO) review on the STAR Market of the Shanghai securities exchange. With the last of China's four major AI Semiconductor players now on the verge of entering the market, China's drive to localize AI chips in response to U.S. sanctions is expected to gain more momentum.
According to Bloomberg News and Lianhe Zaobao on the 17th, Enflame filed its IPO application in Jan. and recently cleared the review in 144 days. The reports said Enflame plans to raise up to 6 billion yuan (about 1.344 trillion won). The company plans to invest the funds in AI cloud semiconductors and related software research and development (R&D) and capacity expansion.
◇ A leading Chinese AI chip player: a domestically made GPU nurtured by Tencent
Founded in 2018, Enflame is considered one of the leading corporations in China's AI cloud semiconductor field. It was founded by Chief Executive Officer Zhao Lidong, a semiconductor expert from U.S. firm AMD, and co-founder Zhang Yalin. The two founders led high-performance central processing unit (CPU) and graphics processing unit (GPU) development at AMD's Shanghai research and development (R&D) center.
Drawing on their experience at AMD, they embarked on developing Chinese AI chips to reduce reliance on Nvidia. Based on a self-developed AI chip architecture, they have released five AI chips to date and are focusing on developing high-performance computing semiconductors mainly used in data centers and Generative AI services.
Enflame is also an AI chip partner of Tencent (腾讯), China's leading information technology (IT) conglomerate. Tencent is a major shareholder holding about 20% equity in Enflame and its largest customer, having supported Enflame to secure domestically made chips to underpin its AI, cloud, and server ecosystem. According to Lianhe Zaobao, of Enflame's 990 million yuan (about 221.9 billion won) in sales last year, 830 million yuan (about 186 billion won), or about 84%, came from Tencent.
◇ All four players head to the market: China's AI rise accelerates
The listing is also tied to China's AI Semiconductor self-reliance strategy in response to U.S. semiconductor restrictions targeting China. Enflame has grown alongside Moore Threads (摩尔线程), Biren Technology (壁仞科技), and Muxi (沐曦) as China's four GPU "little dragons," aiming to develop alternatives to Nvidia.
Earlier, Muxi drew strong investor interest with a sharp rise on its first trading day last month, and Moore Threads, dubbed the "Chinese Nvidia," also succeeded in going public in Dec. last year. If Enflame, the last to list, also enters the market, all four of China's major AI Semiconductor corporations will move to raise large-scale funds through the capital markets. If these companies leverage the funds raised on the market to bolster their technological competitiveness, China's push to localize AI infrastructure is expected to gain further traction.
However, these companies are still assessed to be years behind Nvidia technologically. On average, training chips trail by about five years and inference chips by about three years, and some analysts say the gap feels even larger when factoring in software ecosystems and mass-production capabilities. While they are consolidating their positions in China with government support and expanding domestic demand, many assess they are not yet strong enough to take on Nvidia in the global market.
Improving profitability is also a task. Enflame recorded a loss of 1.2 billion yuan (about 269.2 billion won) last year. Although the loss narrowed from the previous year, it appears it will take more time to turn a profit. The share of R&D investment has exceeded 100% of sales over the past three years, indicating a need for continuous capital injections. The company projected first-half sales this year would reach 10.6 billion to 11.5 billion yuan (about 2 trillion to 2.6 trillion won), more than double from a year earlier, and forecast a loss of around 600 million yuan (about 134.5 billion won).