BYD Semiconductor Raises Additional US$113M; Second Raise in Two Months

The latest investment for BYD semiconductor follows the $267 million funding round conducted late last month

BYD Semiconductor, the chipmaking arm of BYD Co. Limited, the Chinese Electric Vehicles (EVs) maker backed by Warren Buffet, has secured an additional US$113 million in a Series A+ round from 30 investors, according to an announcement on the introduction of strategic investors by BYD on Monday.

Investors who participated in this round include Sequoia China, South Korean conglomerate SK Group, smart phone maker Xiaomi, Lenovo Group, Shenzhen Capital Group, CICC Capital, and China’s largest semiconductor foundry.

According to the announcement, BYD Semiconductor, which has registered capital of approximately $42.3 million (RMB300, 197, 600), received RMB799 million for 7.84% of shares. The latest funds will be used for supplementing working capital, purchasing assets, staff employment, and R&D, the company said.

After this transaction, BYD Co. controls approximately 72.3% of shares of its subsidiary BYD Semiconductor, whose registered capital now stands at approximately $57.6 million. BYD Semiconductor’s valuation before this investment stood at $1.05 billion approximately.

The fresh funds follow last month’s announcement when BYD signed contracts with 14 strategic investors to inject approximately $267 million in exchange for 20.2% of its shares.

Parent Company BYD Co. was founded in 1995, and is listed on the Hong Kong and Shenzhen Stock Exchanges with revenue and market capitalization of more than $14.1 billion. BYD started off as an electronics components manufacturer headquartered in Shenzhen, and now powers all the electric buses and taxis in the city.

On April 14, BYD rechristened its wholly-owned subsidiary BYD Microelectronics Co. Ltd to BYD Semiconductor, ahead of a separate listing. BYD Semiconductor’s business constitutes development, production and sale of power semiconductors, intelligent control integrated circuits, smart sensors and optoelectronic semiconductors.

In December 2018, BYD unveiled its car-level insulated gate bipolar transistor (IGBT) 4.0, and claimed to be the only Chinese automaker who can independently mass produce car-level IGBT. IGBT forms an integral part of Electric Vehicles (EVs), and can control the conversion between direct current and alternating current, and determine the car’s total power output and maximum torque.

The IGBT is called the “CPU of an EV” because it reduces loss of power and increases reliability. It’s the second-most expensive part of an EV after batteries, accounting for around 7-10% of the total cost.

According to a research report by CITIC Securities, 18% of IGBTs for EVs in China were produced by BYD in 2019, while its biggest competitor Infineon owned 58% of the market share. The report estimates this market to be worth $5.6 billion by 2025.

In its 2019 Annual Report, BYD generated a total of $17.2 biillion with $227.8 million in profits, which declined to 1.3%, compared to 2.3% in 2018.

According to BYD’s 2020, Q1 report, the company’s profits in the first quarter fell by 85% whereas revenues declined by 35%, mainly due to COVID-19 outbreak and macroeconomic downturn in China, along with a contraction in the country’s automobiles market. In 2019, China sold approximately 25.769 million units, down 8% YoY.

According to its Q1 Reports, the company expects the economy to recover from the impact of COVID-19, and expects the automobile industry to recover steadily in the second quarter.

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