China’s Lihao Semiconductor, a manufacturer of semiconductor materials, has completed its Series B funding round at 2.2 billion yuan ($307.4 million) to invest in technological R&D and the construction of a new production facility.
Lihao, headquartered at Qinghai Province in northwestern China, claims to have reached the unicorn valuation of over $1 billion less than 18 months since its inception in April 2021.
Through the Series B round, the nascent startup roped in China’s state-linked investors including China-Belgium Direct Equity Investment Fund, an investment platform backed by the Chinese and Belgian governments; as well as China-US Green Fund, which primarily invests in eco-friendly finance solutions and technologies.
The new financing will be earmarked for funding its plan of investing a total of 18 billion yuan ($2.5 billion) in the construction of a manufacturing project to deliver about 200,000 tonnes (200 million kilograms) of high-purity polycrystalline silicon every year.
High-purity polycrystalline silicon, a material for almost all semiconductors, is mostly used in semiconductors across the solar photovoltaic (PV) and electronics sectors.
Lihao’s fast rise as the latest unicorn in China’s semiconductor industry has benefited from Beijing’s pledge to become self-sufficient in advanced technologies, especially semiconductors, amid a COVID-induced global chip shortage and China’s trade frictions with the US.
The Qinghai-based manufacturing project, which is currently under the second of a three-phase development plan, is expected to generate an annual output value of approximately 20 billion yuan ($2.8 billion) when completed, according to public information on Lihao’s official website.
Local investment institutions such as Harvest Capital, Zhejiang United Investment Group (ZUIG), Changjiang Securities Innovation Investment as well as V Fund and Oceanpine Capital, both of which focus on the hard technology sector, participated in the deal as new investors.
Existing shareholders, including IDG Capital, China’s publicly-listed electronic appliance maker Zhejiang Chint Electrics and Jolmo Capital, re-upped in the deal. These investors had injected an undisclosed sum into Lihao’s Series A round in December 2021.
“The iteration and process optimisation in the materials technology are the key driving forces behind the sustainable development of the PV industry. The supply of polycrystalline silicon materials is the first challenge faced by the PV industry when it comes to sourcing upstream materials,” said Xue Ling, executive director of Lighthouse Capital, according to a statement. Lighthouse Capital served as the exclusive financial advisor to the deal.
“The short-term competition landscape [of China’s polycrystalline silicon material sector] will be largely dependent on the production capacity. But in the long run, players with unique technological strengths and the ability to significantly bring down the costs are more likely to win,” said Xue.