Chinese IC companies try to fill in the vacancy in security chip market after HiSilicon’s setbacks, but have different luck

By Li Panpan

Huawei’s IC design company HiSilicon had been a dominant secruity chip supplier to both global and Chinese OEMs. But it suffered setbacks from the U.S. sanctions, leaving market vacancies since the second of 2020 with shortages of certain types even now. Other established Chinese IC companies and startups tried to fill in the markets, but had different luck. The mainstream equipment manufacturers are cautious in changing suppliers, which might result in those startups having to leave the market, JW Insights reported. 

After HiSilicon’s setbacks, other Chinese companies like SigmaStar Semiconductor(星宸科技), Fullhan Microelectronics(富瀚微), Ingenic(君正), Goke Microelectronics(国科微) provided their alternative products for high-end security market and enjoyed strong performance in 2021 with their rich experiences. Among them, Ingenic’s net profit in 2021 increased by nearly 12 times year-on-year.

Given uncertain geopolitical factors, Chinese security equipment manufacturers seem to favor local suppliers to certain extend. An industry insider said, “Chinese suppliers can be better than international ones in meeting the needs of security AI analysis, ultra-low power consumption, and high-cost performance, and providing better customer care, making the market more promising for Chinese players.”

But it is a different scenario for startups trying to go into high-end security chip industry market. Some security equipment manufacturers don’t choose startups as suppliers. A top-three manufacturer said it would select big brands with a better product ecosystem as suppliers instead of chip startups to ensure product reliability and continuous supply.

So few security chip startups have been successful in gaining opportunities in this market. One startup company disclosed that it failed to be accepted by mainstream security OEMs after months of effort, even though its end-side security chips have high computing power with only half or even lower than the price of HiSilicon’s products. It has to change its long-term goal to focus on the automotive-grade market. 

What’s more, the shortage of mid-to-low-end chips has been alleviated since the end of last year. The price of mid-to-low-end chips is going down, and the price for high-end chips remain stable without further increase, according to a supplier source. 

Additionally, China’s security market is with limited growing space. A senior director at leading video solution provider KEDACOM said that China’s security market has become saturated.

It is predicted in the industry that the security market this year will not be as good as expected, given the previous large stocks and uncertainty in geopolitical factors, which might further reduce the price of upstream chips. 

Artosyn (酷芯微电子) is one of the few new players benefiting from the market. With long-term cooperation with a world-renowned machine vision company, it builds a connection with China’s leading security equipment manufacturer Hikvision. It will continue to work on the security market and explore the overseas market. 

Leading Optics(力鼎光电) said that Chinese suppliers benefit greatly from the overseas market with booming demand for security products with loosened pandemic control. Chinese equipment manufacturers like HikVision and Dahua Technology have long regarded overseas markets as their second-largest source of revenue. 

Chinese chip suppliers will grow with equipment manufacturers in international expansion. With better performance and higher cost performance, they are expected to win the fierce local competition and expand new growth space.