2023.05.13 Views:
On May 12th, at the Urban High-Quality Development Forum during the Shenzhen International Venture Capital Festival, Chairman of CoStone Capital, Zhang Wei, emphasized the importance of supporting and developing technology, represented by the semiconductor industry, and prioritizing support for private enterprises due to the increasingly fierce global technological competition.
Zhang Wei believes that Shenzhen currently does not have a competitive advantage in the field of semiconductor technology, during the global and national technology race. However, with a long and high-value semiconductor supply chain, it serves as the "brain" of the modern electronics industry, with every dollar of output driving $100 of GDP, without any shortcuts for overtaking. From the underlying logic of semiconductor investment, the Fourth Industrial Revolution can’t be achieved without semiconductor technology. The competition between China and the United States in the field of technology will further motivate China to strive for self-reliance and promote innovation solutions through a national approach. Zhang Wei emphasized that when an investment aligns with both technological progress and policy guidance, its valuation will transcend traditional financial models. Hence, the reshaping of China's semiconductor industry investment logic is derived from the intense Sino-U.S. technology competition, presenting future investment opportunities in areas where China lags behind in semiconductors.
Zhang Wei revealed that CoStone Capital has established a top-to-bottom comprehensive investment layout in the semiconductor industry chain. Invested companies such as GALAXYCORE,Changxin Memory Technologies,Inc,Birentech, SHOULDER ELEC,INNOSILICON, and UNITED FAITHFUL CREATIVE TEAM, cover the entire industry chain from raw materials, design, packaging and testing, manufacturing, and extend to semiconductor distribution. CoStone Capital has become an "industry chain organizer" in the semiconductor sector. Up to now, CoStone Capital has invested in 53 companies in the semiconductor field, including 28 in design, 13 in equipment, 5 in materials, 3 in packaging, 2 in distribution, 1 in EDA and IP, and 1 in IDM.
Regarding the development of the semiconductor industry in Shenzhen, Zhang Wei suggested focusing on attracting industry leaders and key enterprises in the supply chain, nurturing and fostering leading enterprises in various segments. Specifically, he emphasized the need to cultivate and support several types of leading enterprises, such as semiconductor foundry companies represented by Hefei Changxin and integrated IDM companies, mainstream CPU/GPU and high-performance chip design companies, chip design companies for automotive and industrial applications, including various sensor chips, power and power chips, analog and communication chips, as well as semiconductor equipment, materials, and software platform companies.
Zhang Wei also stated the unique qualities of Shenzhen, characterized by a non-submissive relationship between the government and the people. This has led to the prosperous development of private enterprises and the private economy in Shenzhen, with private enterprises accounting for over 96% of the total number of enterprises in the city. Shenzhen has witnessed the rise of private enterprises in every technological wave, such as Tencent in the internet era, Huawei and ZTE in the telecommunications era, and BYD in the era of new energy vehicles.Zhang Wei suggests that Shenzhen should assume responsibility, gather resources, support private enterprises, and explore and protect entrepreneurs. In terms of industrial planning, long-term and systematic layout should be adopted, similar to what has been done in Hefei, where a blueprint is fully implemented. In terms of institutional mechanisms, both the national system and market-oriented decentralization should be explored and emphasized. Compared to a national system, mass innovation is more dynamic.
Over the past year, the bull market returned, with technology leading the way.
As I said back in October 2024, the rally that began on September 24 was not merely a rebound, but a reversal. Since then, China's capital markets have undergone a broad revaluation, moving from undervaluation toward fair value.
The Shanghai Composite Index reached its highest level in a decade. The "Yi-Zhong-Tian" trio—Eoptolink, Zhongji Innolight and TFC Communication, three prominent Chinese optical communications stocks—saw their share prices multiply severalfold in a single year. Cambricon's market capitalization briefly exceeded RMB 600 billion. Elsewhere in the technology sector, triple-digit price-to-earnings ratios and valuations exceeding RMB 10 billion became commonplace.
Some investors were greedy; others, fearful. Still others asked me: Are technology stocks in a valuation bubble?
My answer is that what we are witnessing is the hunger and anxiety of an era, reflected in the capital markets. Once you understand this, the current fervor for technology investing is no longer difficult to explain.
Investment has nothing to do with macroeconomics, but everything to do with geopolitics.
China-US relations will shape the investment landscape for decades to come. Geopolitics has played a major role in shaping the hunger and anxiety of our times, fundamentally reshaping the way we invest.
What, then, lies at the heart of China's hunger and anxiety?
The Fourth Industrial Revolution is already underway, yet China has not fully overcome the technological shortcomings left by the Third. There is no time to lose.
This is why some people wonder: Why do Chinese computing chip companies command such high valuations when their technologies still lag so far behind NVIDIA's? Why does NVIDIA trade at just 50 times earnings, while a company hailed as "China's answer to NVIDIA" commands a multiple of 300?
To me, this gets the logic exactly backward.
It is precisely because these companies cannot catch up with NVIDIA in the near term that they command a higher strategic premium. The wider the technological gap, the greater the strategic value.
The further something lies beyond our reach, the stronger our hunger. The harder it is to catch up, the deeper our anxiety. If China were to achieve a complete breakthrough in computing chips one day, valuations might actually come down.
Where can one find China's most spectacular natural landscapes?
Much of the answer, I believe, lies in and around the Hengduan Mountains: the Meili Snow Mountains, Jade Dragon Snow Mountain, Mount Gongga, Mount Siguniang, Jiuzhaigou, and many others. Vast differences in elevation and deep fault lines have given rise to landscapes of extraordinary grandeur.
Hard-tech investing follows a similar logic.
Technological gaps, discontinuities in capabilities, and missing links in industrial systems: a leap in difficulty brings a leap in valuation, and a successful breakthrough can, in turn, bring a leap in returns.
This logic extends well beyond computing chips. It is equally evident in memory semiconductors, commercial spaceflight, and other sectors where China still faces substantial technological gaps with other countries.
It was precisely this conviction that led CoStone Capital, starting in 2016, to decisively focus its investments on three areas: hard tech, emerging industries, and life sciences and healthcare. In this context, "hard tech" refers specifically to important industries in which China faces a technological gap with the United States.
Thanks to this forward-looking strategy, CoStone Capital established an early presence across the full value chains of key sectors, including semiconductors, artificial intelligence, and robotics.
Looking ahead, the frontiers of technological progress and industrial upgrading are boundless. Nor can the gaps in hard technology be closed overnight. The twin windows of opportunity presented by technological innovation and the development of homegrown alternatives to foreign technologies have only just begun to open.
The road ahead is long, but the future holds immense promise.
As an investment firm, CoStone Capital will continue to invest where the hunger and anxiety of each era run deepest, move forward with the tensions that shape our times, and extend our reach toward the most challenging—and most important—frontiers.
Spring 2026