The ongoing geopolitical conflict between the US and China has been a source of uncertainty and anxiety for many businesses and consumers. However, some experts believe that the tensions could also spur innovation and creativity in the Chinese tech sector.
Matrix Partners China sees opportunities in deep tech
Matrix Partners China, one of the leading venture capital firms in the country, has been investing in Chinese tech companies that have the potential to create world-leading products and services. The firm recently closed its latest $1.6 billion fund, the largest raise for a China-focused firm this year.
David Su, managing partner at Matrix Partners China, said during a panel discussion at this year’s Lee Kuan Yew Global Business Plan Competition that he is “cautiously optimistic” about the impact of US-China tensions on the tech industry. He said that the conflict has pushed China to be more self-sufficient and independent in various fields, especially in deep tech.
Deep tech refers to technologies that are based on scientific discoveries or engineering innovations, such as artificial intelligence, biotechnology, clean energy, and quantum computing. These technologies often require more research and development, as well as longer time horizons, than consumer-oriented tech products.
Su said that Matrix Partners China has shifted its focus from consumer tech to deep tech in recent years, as it sees more opportunities for growth and innovation in this area. He said that the firm looks for companies that have strong technological capabilities, as well as market potential and customer orientation.
Electric vehicles and battery makers are among the firm’s bets
One of the sectors that Matrix Partners China is bullish on is electric vehicles (EVs). The firm has backed several EV manufacturers, such as XPeng and Li Auto, which have seen rapid growth and expansion in the domestic and international markets.
Su said that EVs are a key example of how US-China tensions have accelerated innovation in China. He said that China has invested heavily in its clean energy and EV industries, as it seeks to reduce its reliance on fossil fuels and foreign technologies.
He also said that EVs are not only a product of technological innovation, but also a reflection of changing consumer preferences and social values. He said that Chinese consumers are becoming more environmentally conscious and willing to pay a premium for green products.
However, Su also pointed out that EVs are not the only players in the industry. He said that battery makers are equally important, as they provide the core component of EVs. He said that battery makers have more pricing power and profitability than EV brands, as they can supply to multiple customers and benefit from economies of scale.
Matrix Partners China has invested in several battery makers, such as CATL and SVOLT, which have developed advanced technologies and products for EVs. Su said that these companies are not only serving the Chinese market, but also expanding globally and competing with established players like Tesla.
China still faces challenges and uncertainties in deep tech
Despite the optimism and confidence of Matrix Partners China, Su also acknowledged that there are still many challenges and uncertainties facing the Chinese tech sector. He said that US-China tensions are not likely to ease anytime soon, and could pose risks and obstacles for cross-border collaboration and trade.
He also said that China still lags behind the US and other countries in some areas of deep tech, such as semiconductors and biotechnology. He said that China needs to invest more in research and education, as well as attract more talent and capital, to close the gap.
Moreover, he said that deep tech is not a guarantee of success or profitability. He said that deep tech companies need to balance their technological ambitions with their market realities and customer needs. He said that deep tech is not only about building a great product or technology, but also about finding a viable business model and creating value for society.
Su concluded by saying that Matrix Partners China is always looking for entrepreneurs who have a vision and passion for deep tech, as well as a sense of mission and responsibility. He said that he believes that deep tech will drive the next wave of breakthroughs and transformations in China and beyond.
