Tencent-Backed Chinese AI Chip Start-up Enflame Prepares for IPO
TMTPOST--Enflame, a Chinese artificial intelligence chip start-up backed by Tencent Holdings, has officially begun the preparatory process for an initial public offering (IPO).
The Shanghai-based unicorn, valued at approximately US$1.65 billion as of September last year according to Pitchbook, has enlisted China International Capital Corporation (CICC) to guide its executives through IPO-related procedures, according to a statement from the China Securities Regulatory Commission (CSRC).
In China, all companies seeking to go public are required to undergo a “tutoring” phase before submitting their IPO application to regulators, a process that typically spans between three and 12 months. While Enflame has not disclosed its intended listing location or the amount it aims to raise, the company's move marks a significant step towards tapping the public markets.
Founded in March 2018 by two former employees of U.S. semiconductor giant Advanced Micro Devices (AMD), Enflame has positioned itself as a key player in China’s burgeoning AI chip industry.
The company is part of a growing cohort of domestic GPU developers aiming to fill the void left by Nvidia, which has been restricted from selling its most advanced chips to Chinese mainland due to U.S. export controls.
Enflame has attracted substantial investment, particularly from China’s state-backed semiconductor fund and major tech companies. By September 2023, the company had raised more than US$742 million across eight funding rounds, according to Pitchbook data.
Tencent, Enflame’s largest shareholder, holds a 21% stake after investing 21.4 million yuan (US$3 million), while the China Integrated Circuit Industry Investment Fund, commonly known as the "Big Fund," owns a 5% stake with an investment of 5.44 million yuan, according to business registry data from Qichacha.
Enflame’s co-founders, Zhao Lidong and Zhang Yalin, who control the company, have signed an agreement to act in concert, holding a combined 32.5% of the company’s voting rights, as stated by the CSRC.
Chinese chip companies like Enflame are facing increasing pressure from investors to offer exit strategies, as the avenues for cashing out have significantly diminished in recent years. This is largely due to heightened geopolitical tensions and economic uncertainty, which have caused venture capital flows to dry up in the country.
Enflame competes with other Chinese chip developers such as Iluvatar Corex, Moore Threads, Biren Technology, and Huawei Technologies' Ascend unit. These companies are all striving to meet the growing demand for domestic alternatives to foreign GPUs.
Unlike some Chinese tech companies, Enflame is not currently on the U.S. trade blacklist, allowing it to collaborate with leading global manufacturers such as Taiwan Semiconductor Manufacturing Company (TSMC). However, a Reuters report in June said that Enflame had to adjust its chip designs to meet TSMC’s production requirements, reflecting the ongoing challenges Chinese chip makers face in securing high-end manufacturing capabilities.
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