Tech industry leads PE/VC investment in TMT in 2022 H2: report
Published: May 18, 2023 08:21 PM
An employee works at a workshop of Traffic Control Technology Equipment Co., Ltd. in Wuqing District, north China's Tianjin, April 3, 2023. The Traffic Control Technology Equipment Co., Ltd. in north China's Tianjin is seeing a continuous increase in order volume this year. Inside the factory, dozens of machines are running at full capacity, and rows of circuit boards for the train operation control system are waiting to be delivered after rolling off automatic production lines.

Headquartered in Beijing, the enterprise officially went into production in 2020. It has reduced the operation cost by about 30% thanks to the supportive polices provided by the coordinated development of the Beijing-Tianjin-Hebei region. (Xinhua/Li Ran)

An employee works at a workshop of Traffic Control Technology Equipment Co., Ltd. in Wuqing District, north China's Tianjin, April 3, 2023. (Xinhua/Li Ran)

China's tech industry led private equity (PE) and venture capital (VC) investment in technology, media, telecom (TMT) industries in the second half of 2022, with semiconductor and information technology services in particular receiving the attention of private investors, according to a report released by accounting firm PwC on Thursday.  

In the second half of 2022, the number of PE/VC investment deals in the tech industry reached 1,521, accounting for 86 percent of the number of investments in TMT. 

The total value of these deals reached $7.03 billion, equivalent to 84 percent of all investment in TMT, according to the report, which summarizes China's TMT investment in the second half of 2022.

"Investment sentiment toward China's semiconductor sector has been running high since 2021… and the fever probably continued in the first quarter of 2023. 

"Investment hotspots include graphics processing units, wafer foundries, chiplets packaging and chip materials," Susan Deng, a PwC partner for the Chinese mainland, told the Global Times on Thursday. But she predicted that there may be a slowdown in China's chip industry investment, which has entered a period of "adjustment and squeezing out bubbles."

According to the report, four start-ups in the IT services industry and four companies in the semiconductor industry each received PE/VC investment exceeding $100 million. 

"On the one hand, the implementation of the US chip act in August 2022 created uncertainty over market value realization and the exit of relevant industry investments. 

"But on the other hand, it has pushed China to speed up building a self-reliant chip ecosystem, which drew the interest of capital," the PwC report said. 

Market observers said that unilateral restrictions Washington had levied on investing in China prompted PE/VC firms to change the way capital exits, for example, it now exits through IPOs in either the Chinese mainland or Hong Kong markets, instead of US markets. 

The PwC report showed that in the fourth quarter of 2022, among the destinations for such IPO exits, 79 percent chose to launch their IPOs in the Chinese mainland, while the remaining 21 percent chose Hong Kong. 

This was a sharp contrast to the second quarter of 2021, when IPOs in the US accounted for 27 percent of the total, while the Chinese mainland accounted for 70 percent. 

"The launch of the across-the-board registration-based IPO system will make the domestic capital market more efficient and better support the development of tech and innovative companies. 

"All these factors will make the A-share market more appealing to both enterprises and investors," the report said.    

In the second half of 2022, the number of PE/VC investments in TMT industries rose by 7 percent from the first half to 1,770. But the amount of investment declined 61 percent to $8.39 billion, reflecting "a cooling market due to the impact of macro factors," the report noted. 

Global Times