A fabless chip maker vaunted as “China’s Nvidia” has announced it will dismiss more than 400 employees after being hit with a shareholders’s suit in a fundraising dispute.
Xiangdixian Computing Technology, a Chongqing-based chip designer established in September 2020, told its staff members in an internal meeting on August 30 that it had to terminate their employment contracts due to a lack of cash.
The unicorn company, valued at 15 billion yuan (US$2.1 billion), laid off dozens of its newly employed fresh graduates in April and started capping all employees’ monthly salaries at 20,000 yuan in May. It has reportedly failed to pay its employees over the past two months.
On September 1 evening, Xiangdixian issued a statement stating that it has not yet gone bankrupt, as it is only “optimizing” its structure to boost efficiency.
The statement said it has been focusing on making graphic processing units (GPUs) since its establishment but China’s GPU market development has not yet met the company’s expectations. The company said it is looking for new investors.
Some commentators said Xiangdixian had to downsize its businesses because its products couldn’t compete with rivals such as Huawei Technologies’ Ascend 910 series and Hygon Information’s Deep Computing Units (DCUs).
They speculated the Chinese government may not want too many GPU types on local markets as this could impede the building of an ecosystem.
“Hygon’s DCUs are now using translation layers for Nvidia’s CUDA software. But it’s possible that Nvidia would ban the use of other chips with its software one day,” a Beijing-based columnist said in an article published in April.
“Although Nvidia has only warned its users about the possible ban and not yet taken any actions, Chinese chip makers should not take chances. They should prepare for the worst by building their own ecosystem,” the writer says.
“The good news is that internet giants such as Baidu and Alibaba have already agreed to include Hygon’s DCUs in the nationwide artificial intelligence (AI) infrastructure ecosystem.”
Tom’s Hardware reported in March that Nvidia included a warning in its end-user license agreement (EULA) that it has banned running CUDA-based software on other hardware platforms using translation layers since 2021. The warning does not actually block the use of CUDA software on non-Nvidia hardware platforms.
A Huafu Securities research report published in May this year claimed that the performance of Hygon’s Shensuan No 1, launched in 2021, is equivalent to 40% of Nvidia’s A100 while Shensuan No 2, launched last year, reaches 80% of the A100. It said the coming Shensuan No 3 will be equivalent to the A100.
Shareholder revolt
Tang Zhimin, chairman and founder of Xiangdixian, reportedly told staff on August 30 that the company had previously agreed with its shareholders to a valuation adjustment mechanism, in which it promised to raise over 500 million yuan in series B financing.
However, he said the company failed to raise enough money and is now being sued by shareholders. He also reportedly said the company’s bank account has been frozen.
The Time Weekly, a weekly newspaper based in Guangzhou, visited Xiangdixian’s headquarters in Chongqing on Monday but its reporter said nobody was there.
The newspaper said Jiangsu Zhongde Services Trade Industry Investment Fund, a state-owned fund jointly formed by China Merchants Group and the Wuxi government, filed a lawsuit against three companies controlled by Tang at a local court in Wuxi, Jiangsu province on August 23. Jiangsu Zhongde and the three firms are all Xiangdixian shareholders.
Separately, Capitalonline Date Service, a Shenzhen-listed cloud service provider, said in its 2024 interim report that it filed a lawsuit against Xiangdixian at the Beijing Arbitration Commission regarding an outstanding payment of 18.8 million yuan.
The company said a local court in Yubei district, Chongqing had already frozen XiangDixian’s assets worth 8 million yuan on August 1.
Tang received his PhD degree from the Institute of Computing Technology (ICT), Chinese Academy of Sciences (CAS), in 1990. Since then, he has worked as a researcher at the ICT until he became the general manager of Apacewave Technologies Limited in 2006.
In 2011, he returned to ICT as a researcher. He worked as chief technology officer at Sugon (officially Dawning Information Industry Co Ltd) from 2012 to 2015 and general manager at Hygon Information Technology from 2016 to 2019 before founding Xiangdixian in 2020.
Tang is currently the dean of the Faculty of Computility Microelectronics at Shenzhen University of Advanced Technology. Although Tang has experience in managing state-owned chip makers, Xiangdixian has not been rescued by state-owned funds or enterprises.
Some observers said it may be because Xiangdixian used foreign intellectual property to make its GPUs. They said if one day the West sanctions Xiangdixian, its operations will be seriously disrupted.
TMTpost.com, a Chinese IT website, said 80% of Chinese GPU makers, including Xiangdixian, are using the intellectual property of Imagination Technologies, a Chinese-owned firm based in the United Kingdom.
Xiangdixian has launched two GPUs, Tianjun No 1 and No 2, but they have never entered mass production.
“The China market has been a bit more challenging than we’d have thought, because of the export control regime here in the UK and also the Entity List in China that has had an impact on us and our revenues,” Imagination CEO Simon Beresford-Wylie told Electronic Engineering Times in an exclusive interview on August 23.
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