Chongqing - Sunny Cai, Managing Partner at SIMIC CAPITAL, spoke with Bridging News on August 15 and said venture capital firms are drawn to the Chengdu-Chongqing economic circle because of its strong industrial base, which drives growth in both cities.

Sunny Cai, Managing Partner, SIMIC CAPITAL. (Photo/Sunny Cai)

The Chengdu-Chongqing economic circle recently launched its first transportation fund to boost infrastructure development and promote new technologies like IoT and vehicle-to-road coordination, improving the investment climate and attracting more venture capital.

High-tech industries and venture capital are interdependent, with industries providing the foundation and capital driving their growth.

Leveraging mutual strengths for growth

"With the new plans, Chengdu and Chongqing are both boosting investments in high-tech sectors like electronic information and integrated circuits," said Cai. For example, Sanan Optoelectronics and STMicroelectronics have established a joint venture in Chongqing.

Western (Chongqing) Science City. (Photo/Lei Jian)

While both cities focus on high-tech sectors, leveraging each city's unique strengths and aligning new developments with existing industries for specialized growth is important.

Chongqing's production of power semiconductors for automotive applications supports its vehicle production sector, integrating new technology with existing industries, while Chengdu's strong electronics R&D drives innovation.

The new materials industry is vital for both cities. In Chongqing, it advances the automotive sector, particularly EV battery production, while reinforcing the broader manufacturing ecosystem. In Chengdu, new materials drive high-tech development, supporting electronics and integrated circuits, complementing Chongqing’s downstream focus while maintaining Chengdu’s upstream edge.

Furthermore, the distinct topography, advanced manufacturing capabilities, and robust research talent significantly boost the growth of commercial aerospace. Regarding AI, the Chengdu-Chongqing economic circle leverages its abundant hydropower, dense population, and robust manufacturing industry to drive progress in AI computing power and data development.

Cai noted that accelerated high-tech growth in the Chengdu-Chongqing economic circle will spotlight sectors like specialized semiconductors, integrated circuits, new materials, commercial aerospace, and AI as prime investment areas and mark them as key development directions of industries.

Venture capital fuels tech development

Focusing on high-tech industries like integrated circuits and promoting technological commercialization in the Chengdu-Chongqing economic circle, Simic Capital launched its Chengdu & Chongqing Dual-Cities Collaborative Innovation Fund (Limited Partnership) in Chongqing this year.

Cai highlighted the pivotal role of venture capital firms in the high-tech industry ecosystem, noting their ability to speed up the commercialization of technological advancements and further boost high-tech industry growth in the Chengdu-Chongqing economic circle.

"There is a gap between technological achievements or ideas and their transformation into industry," Cai said. Venture capital firms use funds and evaluation processes to actively identify promising startups or teams, offering ongoing financial and resource support. In return, they benefit from the investment returns generated through these ventures.

Cultivating and incubating automotive technology products. (Photo/Huxin Luo)

A complete ecosystem is essential to connect high-tech startups with the industry. Venture capital firms are crucial in developing this ecosystem. Through continuous exploration, Cai noted that Simic Capital has identified three key platforms within this ecosystem: original technology, pilot testing, and industrialization.

Original technology platforms concentrate on developing scientific innovations and creating prototypes in the lab. These prototypes must be transformed into products suitable for mass production with high yields, which involves advancing to a pilot testing platform. Finally, scaling and profitability must be addressed to make products commercially viable, requiring investment and transitioning to an industrialization platform.

Cai stressed that staying market-oriented is key to creating a virtuous cycle among the three stages. This approach ensures that technologies meet market needs, achieve successful industrialization, generate returns, and drive further R&D.

Cai noted that venture capital firms face challenges in incubating high-tech startups. These include strained relations between startups and established companies and an overemphasis on research institutions in the Chengdu-Chongqing economic circle.