Diversification Campaign Continues
The company’s decision represents another move by Chinese tech business giants to expand in the chip industry. For Baidu, it also represents an opportunity to diversify beyond the advertising business.
The stand-alone AI unit would be Baidu’s subsidiary, which will likely be the majority shareholder, according to the CNBC report. Venture capital (VC) firms, including GGV and IDG Capital, are interested in investing in the new AI-powered chip business.
The search company already owns a chip business that designed its Kunlun semiconductors, which are able to handle substantial amounts of data for AI applications. The aim behind a new AI chip business is to help the company to further commercialize its technology.
Moreover, the new chip business will be selling semiconductors to clients from various sectors including carmakers, which are currently dealing with chip deficit issues. The stand-alone unit would integrate into other Baidu operations, including its driverless car software.
The expansion represents a part of Baidu’s drive to diversify its operations, a push that has helped the Chinese company secure funds for a biotech firm and a stand-alone EV company.
The majority of Baidu’s revenue comes from advertising at the moment; however, contributions from other businesses continue to increase. Advertising accounted for around 80% of Baidu’s total business revenue in 2018 and around 71% in Q3 2020.
China has been pushing domestic independence surrounding semiconductor technology, particularly after its trade disputes with the United States. Semiconductors play an essential role when it comes to consumer electronics, especially now, when devices have become smarter and more connected to the internet. In addition, their role in the automotive industry is also becoming increasingly significant.
“So without semiconductors, China cannot be a very meaningful technological power, and its own technology companies including a major company like Huawei may not necessarily be able to maintain operation if China does not have substantial capability to actually maintain and manufacture semiconductors,” Dan Wang, technology analyst at Gavekal Dragonomics, said.
Other Chinese tech giants have also invested in AI. Tencent has recently provided support to an AI startup, while Alibaba rolled out its first semiconductor that powers AI processes back in 2019.
Startup Savant recently reported that the semiconductor company GlobalWafers raised its offer for the German Siltronic to $5.35 billion.
Chinese online company titan Baidu is seeking to raise funds for a stand-alone AI semiconductor company, allowing it to diversify beyond its core advertising business.
About the Author
Avi Ben Ezra is the CTO and Co-founder of SnatchBot and SnatchApp (Snatch Group Limited). He leads the Group’s long-term technology vision and is responsible for running all facets of the tech business which includes being the architect of the platforms and UI interfaces.