Insurance funds fueling tech advancements

June 3, 2024
1 min read




Insurance funds boosting tech – Summary

TLDR:

Insurance funds are playing a crucial role in boosting technology and innovation in China. Companies like Advanced Micro-Fabrication Equipment Inc China are benefiting from investments in the chip industry. China Life Asset Management Co Ltd is using insurance capital to invest in emerging industries like integrated circuits through innovative methods like secondary funds. This capital is highly patient and provides long-term financing throughout the full life cycle of technology companies.

Key Elements:

  • Digital devices rely on advanced technology, especially chips that are crucial for connectivity.
  • Investment in chipmaking requires massive capital, which insurance funds are providing to support technology-intensive industries.

It has become hard to imagine life without digital devices, especially smartphones. While gadgets are becoming more intelligent, chips, their very backbones that make connectivity easier, are becoming smaller in size though larger in terms of importance. A nail-sized chip used in smartphones now contains more than 10 billion transistors, and each transistor needs to be produced by high-end equipment such as photolithography machines, laser etching machines and thin film equipment, according to Hu Xiao, director of the securities business department of Shanghai-based Advanced Micro-Fabrication Equipment Inc China. The company went public on the STAR Market at the Shanghai exchange in July 2019, making it one of 25 companies that debuted on the board projected to nurture “hard technologies”. “It is extremely difficult to make major technology breakthroughs in the chip industry. Investment in chipmaking can be stratospheric. Investing in an advanced chip production line requires tens of billions of dollars, which is far beyond the ability of ordinary enterprises. The capital market is thus needed,” said Hu.

Yang Fu, executive vice-president of chip design company UNISOC, said continued capital injection is indispensable for technology-intensive industries like integrated circuits. Meanwhile, a market more tolerant of the ups and downs of technology advancement is crucial, she said. In this sense, insurance capital can fit into the scenario as it is “highly patient” and an advocate of long-term and value investment, said Liu Fan, vice-president of China Life Asset Management Co Ltd, an investment arm of the country’s largest insurance group China Life Group.


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