As China speeds up efforts to achieve self-reliance in artificial intelligence (AI) semiconductors, sales of the four leading Chinese graphics processing unit (GPU) makers, known as the "four dragons," have surged. MooreThread (摩尔线程), MetaX Integrated Circuits (沐曦股份), Biren Technology (壁仞科技), and Iluvatar CoreX (天数智芯) all saw their first-half sales jump by double digits or more from a year earlier, with Biren Technology in particular growing nearly 20 times year over year.
However, with the financial burden from research and development (R&D) investment and expanded production, operating losses and cash outflows are continuing, leading to assessments that they have entered a phase where they must solve the dual challenge of sales growth and securing profitability at the same time.
According to Chinese business outlet Caixin on the 1st, MooreThread recorded first-half sales of 1.736 billion yuan (about 354.2 billion won), up 147.4% from a year earlier, surpassing last year's full-year sales. MetaX Integrated Circuits posted 1.32 billion yuan (about 269.3 billion won), up 44.7%; Iluvatar CoreX posted 946 million yuan (about 193.0 billion won), up 191.6%; and Biren Technology posted 1.24 billion yuan (about 253.0 billion won), soaring 1,997.6%.
Behind the growing opportunities in China's AI chip market are the spread of AI services and U.S. restrictions on exports of advanced semiconductors to China. According to the China Academy of Information and Communications Technology, demand for AI computing in China in the first quarter surged 417%, while the supply growth rate was only 128%. Caixin noted, "High-performance chips have already entered a seller's market, pushing prices up and making it hard to get even a single chip," adding, "Those who secure production capacity win customers."
But it is hard to say that Chinese AI chipmakers have secured competitiveness to catch up with major global players based on sales growth alone. All four companies are still in the red in their core operations.
MetaX Integrated Circuits swung to a profit with first-half net income of 612 million yuan (about 124.9 billion won), but gains from an increase in the value of the company's financial assets alone reached 887 million yuan (about 181.0 billion won). Excluding that, it posted a loss of about 49 million yuan (about 10.0 billion won).
Iluvatar CoreX also reported adjusted net income of 246 million yuan (about 50.2 billion won) in the first half, but this was largely driven by 760 million yuan (about 155.1 billion won) in valuation gains on financial assets. Excluding that, it is estimated to have incurred an actual loss of about 510 million yuan (about 104.1 billion won).
Biren Technology's first-half net loss was 337 million yuan (about 68.8 billion won), and MooreThread's net loss was 151 million yuan (about 30.8 billion won). None of the four companies has yet reached the stage of generating stable profit from chip sales themselves.
Massive research and development (R&D) expenses are also pressuring profitability. In the first half, R&D investments by MooreThread, MetaX Integrated Circuits, Biren Technology, and Iluvatar CoreX amounted to 40% to 65% of sales. That is because even if they generate revenue from one chip generation, they must plow it back into developing next-generation chips and building a software ecosystem.
Cash flow is also a problem. MetaX Integrated Circuits and MooreThread both posted more than 1 billion yuan (about 204.0 billion won) in negative operating cash flow. As AI chip demand grows, they must deploy funds to pre-purchase materials and supplies such as wafers and high-bandwidth memory (HBM) and to increase inventories to ramp up production. Caixin explained, "The four companies are commonly facing the problem of funds being tied up on both ends," adding, "Upstream, they must pay advances to secure production capacity, and downstream, sizable accounts receivable arise."
Accordingly, Chinese AI chipmakers are actively seeking external financing. Biren Technology and Iluvatar CoreX have each succeeded in raising more than HK$7 billion (about 1.2246 trillion won) in Hong Kong. MooreThread and MetaX Integrated Circuits are also pursuing listings on the Hong Kong stock market.