Beijing-based EnnoHub is leading a seed round in chip design startup NewSight Imaging. While the cash wouldn’t normally be news to Israeli ears – providing half of the $500,000 round – Enno Hub Co-founder Liaki Li tells Geektime this is the first of a wave of new seed-stage investments that will come to Israeli startups, and in his firm’s case the first of many focused on Israeli computer chips and sensors.
“The value chain is very long, from design to packaging and testing to production, this sector is very wide and China is very short.”
He describes EnnoHub as a “cloud-based incubator” divided into the Ennotech incubator and EnnoVenture fund, mainly targeted at smart manufacturing industries which need smart digital tech like semicronductors, IoT and medical technologies. It’s their very first investment in Israel, but what is unique about it isn’t the geography – Chinese money is flooding the country. It’s the round.
NewSight — founded by CEO Eli Assoolin — makes chips which have built-in sensors for image transfer and have wide-reaching application: robotics, drones, IoT, self-driving’s LiDAR systems, medical devices and most importantly to Li, smart manufacturing. China is the most prolific manufacturer in the world, but Li is anxious about an accurate reputation for low-quality manufacturing that he thinks can eventually erode that global leadership position.
“Sales are very slow. If they upgrade these products, quality can be improved and production can be various. The price can go up. Then everything can change, the upgrading and transformation of the Chinese economy.”
His terminology refers to the national government’s plan to do just that, in particular with manufacturing. The only way forward must be to automate part of that process. Where does he want to start?
Chips, the bottom platform technology that will make all of this possible.
According to Vadi Ventures, the Chinese-Israeli firm that made the match between EnnoHub and NewSight on the sidelines of China-Israel Hi-Tech Investment Forum this year that was co-sponsored by Geektime, China seeks to become the world’s premiere manufacturing hub for chips by 2025.
Li tells the story of moving from a government job focused on building foreign business connections to getting his Ph.D. in Canada. After founding a law firm back in Beijing in 1997, he left to be a professor of corporate governance and then a writer. His focus: innovation. That has lead him to become a partner in EnnoHub and afforded him the opportunity to now be on his fourth trip to Israel where he says he is “overwhelmed” by the innovation culture that, in his words, is lacking backing home.
Raising a Chinese chip industry
“China must learn it is making low-end low quality products and needs to move to high-end, hi-tech, high-value chain. I’ve come to Israel to look for those high technologies. China’s sectors want to upgrade. They need basic technologies to make this happen: semiconductors, chips, sensors, new materials, robotics, AI; everything digital is very strong here.”
But there is a dearth in homegrown chip design and production. For all that can be said about China’s dominance of global manufacturing, it imports a massive amount of semiconductors, chips and sensors every year.
“I heard this from a speech made by Mr. Ye Tian Chun, professor and head of Research Institute Micro-electronics, PRC Academy of Science,” Li tells Geektime, admitting he isn’t sure of the exact figure (Geektime also couldn’t find an exact figure). According to Bloomberg, China bought more than half of the world’s sold chips in 2014, which would only be in excess of $168 billion according to Recode. That approaches another staggering number, the roughly $228.5 million China spent on oil imports in 2014 (the source rounds down to $228B while we round to nearest 500M).
The Chinese government has vowed to drop hundreds of billions of US dollars on building a domestic chip production powerhouse, more than $170 billion according to McKinsey, perhaps as high as $200 million according to Vadi Ventures. Some of that effort is also enticing foreign companies to move operation to the country. Dutch-based NXP has entered into a joint venture with China’s Datang Telecom Technology. Qualcomm settled disputes with Chinese regulators partially with a $150 million dedicated venture fund while Intel has poured over $3 billion into its Chinese chip plants according to the same Bloomberg report.
“I want to see China in the next 30 years rise to join the Western countries,” he says, with particular emphasis on the what he dubs the most innovative countries in the world, Israel and the US. Speaking about the current state of China, he says that, “It’s still a mid-income country, a little better, but it’s caught in the middle income dilemma. If it wants to cross that dilemma, it needs to move to an innovative technological economy.”
Li boasts to Geektime about his investment having two strong leaders in the industry, each with 20 years of chip design experience, and that leadership like that can lead the way in having new teaching and training centers back home.
“It’s a part of my plan to bring Israeli semiconductor industries to China. I want to build a bridge between China and Israel to make Chinese manufacturing smart.” That involves not just bringing the IP to manufacturing hubs in the Red Dragon, but also enticing his investees to impart their knowledge and a bit of their entrepreneurial streak to China’s would-be chip business leaders.
Li plans to set up a Chinese joint venture or wholly owned subsidiary to operate sales and marketing in China. He hopes that the theoretical R&D will stay in Israel, but wants to shift application R&D to the regions where they are focusing their sales, namely in Shanghai and Shenzhen.
As for the future, he’s looking forward to continuing his investment in and around the Tel Aviv area.
“I want to buy and invest in seed, why? I’m planting a seed of innovation in China. You [already] planted the seeds of innovation hundreds of years ago in Israeli culture,” he says, likely alluding to pre-state Jewish culture. “For me, it’s very symbolic.”