The silent rise of Chinese high-tech start-ups

In a brightly lit corner of a Hong Kong showroom, a 300 kg black robot disappears under a stack of shelves. The shelf levitates and slides towards an order picker who removes an item before the shelf is removed by algorithms that guide it to find the most strategic place to park based on the popularity of the goods on the shelves.

The choreographed shelf dance is orchestrated by Geek+, a Beijing-based robotics start-up that has garnered foreign backers including Intel Capital and Warburg Pincus, despite international concerns over Chinese tech policies.

Following a grueling Beijing regulatory assault on its internet giants and a spate of US sanctions against Chinese tech companies, many investors have scaled back their exposure to Chinese tech, with some declaring it uninvestable.

But in the shadow of this pervasive pessimism, there are bright spots and foreign capital is still flowing into high-tech sectors. Data from China’s Ministry of Commerce showed that foreign direct investment in China’s high-tech manufacturing and high-tech service sectors grew 43 percent and 31 percent in the first eight months of 2022 compared to the same period in 2021.

However, venture capitalists and private equity groups chasing unicorns in China must keep politics at the forefront of their investment decisions. “You have to choose the right sectors with political tailwinds before you choose the company. If you don’t have insight into political trends, you’re investing in the dark,” said a private equity investor at a China-focused tech fund.

That means finding companies that align with China’s strategic goals but don’t fall on the wrong end of US sanctions. To placate Beijing without offending Washington, many Chinese funds have focused on healthcare, biopharmaceutical and high-tech niches with no military application like warehouse robots.

Trying to find that sweet spot has boosted the appeal of companies like Geek+ with technology consistent with Beijing’s push to accelerate automation. With China’s population expected to start shrinking this year, policymakers want machines to replace more human labour. In traditional warehouses, order pickers can spend more than 70 percent of their time walking between shelves.

Beijing has directed Chinese companies to replace foreign technology with domestic alternatives where possible, creating an ecosystem that allows companies like Geek+ to thrive. The Beijing-based startup is currently dominating the growing autonomous mobile robot (AMR) market along with two other Chinese robotics makers — Hai Robotics and Hikvision. These robots, powered by Intel chips, mimic the movements of an order picker instead of transporting items on a rail or conveyor.

According to the International Federation of Robotics, demand for AMR robots increased by 45 percent in 2021, driven by the pandemic, which highlighted the need for accelerated supply chain automation. Geek+ has sold 20,000 robots in the past year that are not yet making a profit and has made $300 million in sales and projects, of which it will sell 30,000 in 2022. The company also has a growing list of clients in the West.

This growth story has appealed to investors. In August, Geek+ raised $100 million in a new fundraising round, giving it a $2 billion valuation. Although the political winds in Beijing have favored such companies, there is still a great deal of uncertainty as to when investors will be able to withdraw funds.

Geek+ robots are programmed to find the most efficient routes, reducing the time between a customer placing an order online and the package arriving at their door. In the past, Chinese tech startups have been guided by a similar logic: how to find the most efficient way to go public.

As one veteran Chinese tech investor put it, founders once ran their companies like a “box-and-tick exercise to meet all the criteria exchanges had to have to go public.”

But that raison d’être changed last year after ride-hailing giant Didi’s disastrous IPO. Days after the blockbuster $4.4 billion IPO, Chinese regulators launched an investigation into the company over alleged data breaches, and Didi was later delisted from the New York Stock Exchange. As a result, the golden pipeline of Chinese tech companies going public has all but dried up.

“Putting a company public is still a focus for investors. But the process comes with political and geopolitical risks. So much has changed in the past year,” said the private equity investor.

eleanor.olcott@ft.com

https://www.ft.com/content/54f26781-bb54-4f2a-8277-99d7eb4c864c The silent rise of Chinese high-tech start-ups

Adam Bradshaw

TheHitc is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@thehitc.com. The content will be deleted within 24 hours.

Related Articles

Back to top button