Top Chinese semiconductor investor released from detention

The Financial Times, which reported Chen's release, said it was driven by the regulators needing experts to address tensions arising from the ongoing "chip war" between the US and China. Chen is no longer mentioned on the WestSummit website.

His detention came amid a string of investigations into China’s chip industry. Since mid-2022, a dozen executives and officials at Sino IC Capital, which manages China's largest semiconductor-focused investment fund, have been placed under investigation and detained. China's Commission for Discipline Inspection announced several investigations on its website.

The IC Fund, or Big Fund, was established in 2014 with CNY 138.7bn in commitments. A second iteration launched in October 2019 with a target size of CNY 204.2bn. More than two-thirds of the big fund's investments have supported China-based contract integrated circuit makers, including Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor.

It has been speculated that the Chinese government wasn't happy with the fund's performance and sought to uncover corrupt activity. However, industry participants previously told AVCJ that the fund is one of few projects to have delivered commercial returns and supported the national strategic agenda.

The Big Fund was widely regarded as a “gold finger” investor: whatever it touched would see a spike in valuation. However, compensation was structured like a state-owned enterprise rather than a VC firm – fixed salaries with no incentives – and there were reports of executives making personal investments on the side.

Chen is known for founding two US-listed chip companies, Omnivision and Spreadtrum. He renounced his US citizenship in 2014, committing to help build up China’s chip industry.

Chen was involved in Big Fund investments in the early years only, according to sources familiar with the situation. He then primarily focused on state-backed Oriza Hua under Oriza Holdings, which manages around Rmb10bn (USD 1.5bn) and has seeded more than 150 Chinese chip companies.

Chen's detention coincided with that of Weiguo Zhao, ex-head of chipmaking giant Tsinghua Unigroup and founder Yangtze Memory Technology, the country's leading flash memory chip maker. Zhao was handed over to prosecutors this month.

During Zhao's tenure, Unigroup made a string of debt-fueled acquisitions at home and overseas in support of national objectives to enhance chip manufacturing and design capability. However, the firm has since struggled with its debt load, defaulting on a domestic bond in 2020 and looking at refinancing options.

In autumn 2021, a USD 9.5bn restructuring was announced. The participating consortium features Jianguang Asset Management (JAC Capital), a state-owned investor, and Wise Road Capital, which is described as an international Asian growth capital investor. Zhao officially objected to the restructuring.

 

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