China’s AaltoSemi, a developer of integrated circuit (IC) substrates, has secured a new investment from investors including the country’s electric vehicle (EV) giant BYD to bring its overall fundraising so far to over 2.5 billion yuan ($351.3 million).
Nanjing-headquartered AaltoSemi raised the latest round from new investors including Chinese insurer-backed Riverhead Capital; investment bank GY Capital; and Yuexiu Industrial Investment Fund, a private equity (PE) arm of China’s Yuexiu Capital Holdings. BYD, which overtook Elon Musk’s Tesla in the final quarter of 2023 to become the world’s biggest EV manufacturer, invested in the new round.
AaltoSemi’s existing shareholders continued to back the firm’s latest financing, China Renaissance announced in a WeChat post on Monday. Its subsidiary China Renaissance Securities served as the exclusive financial adviser to the deal.
The new investment, especially the part from strategic investors in the automotive industry, will significantly enhance AaltoSemi’s capabilities in building and commercialising products used in auto electronics, said China Renaissance.
Founded in May 2021, AaltoSemi specialises in the R&D, design, production, and testing of IC substrates — the base materials of IC packages that protect and facilitate connections between the chip and circuit board.
The startup is building a high-precision and highly-automated IC substrate production base in two phases that cover a total of 276,700 square metres (almost 3 million square feet).
AaltoSemi did not disclose when the production base will be put into operation. But it said it plans to invest up to 4.5 billion yuan ($632.3 million) in the construction of the Phase I project that, once completed, can produce as many as 1.45 units of IC substrates per year.
Thanks to strong government support, the rapid growth of China’s domestic semiconductor industry has ignited investors’ enthusiasm for backing startups operating in the local chip supply chain.
Private market investments in the country’s semiconductor sector reached a record high with the completion of 125 deals in Q3 2023. Overall, investors poured almost $3.4 billion, representing an increase of 41.6% from Q2 and the highest quarterly performance since Q4 2021, according to DealStreetAsia DATA VANTAGE’s report Greater China Deal Review: Q3 2023.
“Made-in-China high-end IC substrates represent a growing market of opportunities amid a rise in demand for AI, data centres, intelligent vehicles, and supercomputing,” said Lu Rong, managing partner and president at Yuexiu Industrial Investment Fund.
“We strongly believe in the AaltoSemi team’s decades of experience in IC design & packaging and expertise in managing a large-sized company to advance technological innovations and product R&D,” said Lu.
He added that AaltoSemi has the potential to make technological breakthroughs and offer domestic replacements in this market dominated by just a handful of players from Japan, South Korea, and Taiwan.
Before the new round, AaltoSemi secured 500 million yuan ($70.3 million) in its Series A1 round led by CTC Capital, a Chinese semiconductor-focused investment firm, with participation from companies such as SL Capital and Lanhor Capital.