China's Corporate Venture Capital: Twenty Years of Love and Strife

By Ren Qian

Edited by Chen Zhiyan and Jing Liu

Alliance and Rivalry

On February 22, 2023, a bitter wind swept through Haishu District, Ningbo. At 238 Yunlin Middle Road, a memorial service was underway. The deceased was a towering figure in China's apparel industry: Zheng Yonggang. But he may have taken greater pride in another title — lithium titan.

Ten months prior, Shanghai Shanshan Lithium Battery, under Zheng's leadership, had just completed a 3.05 billion yuan external capital raise. The investor roster was a rare gathering of key giants from across China's lithium battery supply chain: CATL's wholly-owned subsidiary Dingfeng Investment, BYD, ATL, and Kunlun Capital under CNPC. Among them, Dingfeng contributed the largest sum after the parent company.

This injection not only helped Shanshan Lithium pay down pressing debts but also secured funding for negative electrode material capacity expansion — which directly determined whether it would claim the global top spot in shipments that year.

Yet this investment was hardly CATL's first move with Shanshan Lithium. The story stretches back at least 15 years.

In 2007, Zheng was in his ninth year of building a lithium battery business. Before that, he was better known as the apparel mogul who founded the Shanshan brand. In the 1990s, with 60,000 yuan borrowed from others, the CCTV slogan "Shanshan suits — don't be too dashing" became a collective memory for the reform-and-opening generation. Shanshan was also China's true "first apparel stock."

However, with China's imminent WTO accession, Zheng — a military veteran and former truck driver — sensed that a flood of international brands would soon hit the Chinese market, lowering the ceiling on the apparel business. Without hesitation, he relocated headquarters from Ningbo to Shanghai, poached Hu Haiping from his role as P&G Asia-Pacific marketing general manager at considerable expense, established Shanshan's high-tech division, and pivoted to lithium batteries — a business utterly unrelated to apparel.

In 1999, Zheng effectively relocated the entire Anshan Thermal Energy Research Institute — personnel and technology — to Shanghai, even buying homes in Pudong for every family, finding jobs for spouses, and enrolling children in schools.

Sustained by cash "transfusions" from the apparel business, Shanshan gradually became China's top supplier of lithium battery negative electrode technology, landing orders from ATL, then the world's leading polymer lithium-ion battery manufacturer. When the first-generation iPhone launched in 2007, Shanshan — through ATL's introduction — became one of Apple's key suppliers in China.

Naturally, when Robin Zeng spun off ATL's power battery team to found CATL in 2011, Shanshan became one of its most critical negative electrode material suppliers, gradually embedding itself deeper into CATL's new energy empire. The 2022 strategic capital raise only tightened this bond.

This practice — where resource-rich entities within a supply chain make equity investments to strengthen symbiotic relationships with upstream and downstream partners and promote overall industrial development — is called "industrial investment." Unlike financial investment, which aims to "capture medium-to-short-term financial value and primarily achieves capital appreciation through premium exits," the core of industrial investment is "inter-firm symbiosis."

Though industrial investment has drawn increasing attention in recent years, with some believing it will replace financial investment as the dominant force in China's capital markets, it is hardly a new phenomenon.

In 1998, IT manufacturer Start Group invested 12 million yuan in startup Chinese localization software company Mingtai Technology — widely considered China's first industrial investment of meaningful scale. Even in manufacturing, one can find Alibaba — barely a year old in 2000 — participating in an investment in Haier's smart home brand "Haier Smart Home," back when Taobao hadn't even launched.

These early industrial investment stories share several traits: first, they were driven by the goal of developing entirely new businesses; second, strategic synergy proved difficult to sustain.

The reason for this was the absence of "chain masters." So-called chain masters are enterprises occupying core or dominant positions within lengthy supply chains. They possess the ability to integrate resources and coordinate supply across the entire chain, serving as the driving force behind industrial investment. The cultivation of a chain master's investment system is inseparable from market size, integration capability, and technological level. When a chain master's market position and technical capabilities are secure, it can drive collective growth among upstream and downstream firms; once that position wavers, the entire chain collapses like monkeys scattering from a fallen tree.

China's prolonged lack of chain masters and the resulting difficulty in forming industrial investments were determined by historical trajectory. Only with WTO accession in 2001 did China truly embark on its path to becoming a manufacturing powerhouse. It wasn't until the past decade that a cohort of "behemoths" emerged — CATL, BYD, Huawei, Xiaomi, BOE, SMIC — occupying core positions in their respective chains, with sufficient scale and billion-yuan-level revenues, enabling truly distinctive Chinese proactive outbound investment. Some individual deals have even exceeded 10 billion yuan: in June this year, CATL revealed plans to invest $1.4 billion to build two lithium salt processing plants in Bolivia.

Shanshan Lithium represents a textbook "CATL-style" industrial investment: for upstream supply chain companies, throw orders first, then bind deeply through equity. Other classic cases include: before formally investing in lithium battery equipment maker Lead Intelligent in 2021, CATL had placed a 3.2 billion yuan "mega" order within a single month (accounting for 69% of Lead's 2019 revenue); four months before becoming the second-largest shareholder of Yongtai Technology, CATL had signed a five-year electrolyte material supply contract; and when cathode material leader Hunan Yuneng conducted a capital raise in December 2020 that brought in CATL and BYD, both had long been its top two customers, with combined sales revenue exceeding 90%.

Anyong Waves has compiled some figures: CATL's latest semi-annual report shows long-term equity investments of 42.82 billion yuan, with actual control over more than 600 companies; SMIC Capital, launched by SMIC, has nearly 40 billion yuan under management and has invested in over 200 companies; and even Huawei Hubel Investment, founded only in 2019, has invested in more than 100 semiconductor companies in just a few years.

Like CATL and Shanshan Lithium, orders are the starting point for these industrial investments, and are widely considered the most meaningful distinction from financial investment.

In the mobile internet era, an equity investment was typically driven by financial motives — "100x returns" were the ultimate dream for many investors, while "empowerment," resources, and synergy were merely decorative flourishes in press releases. But as industrial investment gains dominance, in today's business world, an ideal investment often directly translates to more seamless business cooperation, more reliable order sources, and a more secure and stable supply chain.

At a deeper level, industrial investment matters today because in certain industries, whether an emerging company can rise depends not only on its technology and commercial capabilities — whether it sits within a system constructed by an industry leader can be a matter of life or death. Mutual reinforcement veiled by covert rivalry: this is the true face of industrial investment.

The Power of Systems

In 1999, a factory with just three employees opened in a 150-square-meter old warehouse in Wuxi. Its 33-year-old director, Yanqing Wang, was a "state-owned enterprise deserter" driven by sheer necessity. A few years earlier, when his son was born, this veteran technician with over a decade of service had been scrambling to borrow money. Now that he had his own factory, he had only one thing on his mind: making money.

At first, Wuxi Lead Intelligent Equipment, as it was called, survived on orders from Panasonic and Japan's TDK, building high-voltage capacitor winding machines. Its technical excellence eventually brought annual profits into the tens of millions. But the true turning point that would transform it into a leader in intelligent lithium battery equipment came in 2012.

In a TV interview, Wang once said, "In lithium battery equipment, it was our customers who made us." But the customers he meant were neither Panasonic nor Sony — they were ATL. In 2012, Apple approached ATL with a request to change its battery design. For the winding process, which at the time had the lowest domestic substitution rate, ATL chose Lead Intelligent. Two years later, Lead delivered lithium battery equipment to ATL's subsidiaries Dongguan Amperex and Ningde Amperex. That year, ATL accounted for over 40% of Lead's revenue.

Beyond the revenue itself, this order mattered because it gave Lead a foothold in CATL's supply chain. The person from ATL who had approached Wang was Robin Zeng, then serving as ATL's president. In 2014, Zeng — who would go on to found CATL — came to Lead again, signing a single order worth nearly 60 million yuan for lithium battery equipment. That year, Lead's lithium equipment revenue hit 152 million yuan, a staggering 561% year-over-year increase. From then on, CATL gradually became Lead's largest customer.

This was, for all practical purposes, the decisive moment that shaped the entire lithium battery equipment industry's future. In 2021, when Lead raised 2.5 billion yuan in a private placement, CATL was among the participants, becoming its third-largest shareholder. And the technician who once joked that he couldn't even afford a wedding ring now had a fortune of 33 billion yuan, making him the undisputed richest man in Wuxi.

Wang was hardly the only regional tycoon nurtured within CATL's vast ecosystem. On a list of China's top 10 battery industry billionaires, five came from CATL itself. Of the remaining five, two founded companies that sat in CATL's supply chain.

Another family that rode CATL to the top of regional wealth rankings was the Li family of Yunnan. The Li brothers had built their fortune on cigarette packaging. Through acquisitions, they pivoted to new energy, transforming their tobacco packaging company, Yunnan Energy New Material (ENM), into an A-share leader in battery separator films. Lithium battery separators had originally been a casual side bet for the Li family. But after they began supplying CATL in 2015, ENM's revenue surged dramatically.

Then there's Tinci Materials, CATL's electrolyte supplier. Its founder, Jinfu Xu, had originally co-founded Blue Moon. Having achieved financial freedom by age 28, he left Blue Moon and returned to his hometown of Fuyang, Zhejiang, to start a business developing active pharmaceutical ingredients. It didn't go well — his "first bucket of gold" evaporated entirely. In 2005, he entered the lithium battery industry by acquiring American firm Dr. Novis Smith, becoming one of the few domestic producers capable of manufacturing lithium hexafluorophosphate in-house. Revenue grew from 158 million yuan that year to 22.32 billion yuan in 2022 — a 141-fold increase over 18 years, roughly half of which owed to CATL.

To simply attribute these companies' success to "latching onto a big leg" would be unfair; their solid technical foundations were precisely why CATL selected them in the first place. But as a chain master, CATL's influence on their development was undeniably profound. This dynamic played out across the most critical components of lithium batteries — cathode and anode materials, electrolytes, separators — and even down to the cellular level of the battery itself.

Boehmite is a novel coating material used in battery separators, a niche raw material for lithium batteries. Domestic company Estone began R&D in 2008 but struggled to achieve mass production for years. In 2014, Estone entered CATL's supply chain. Thereafter, it rapidly became the global revenue leader in boehmite.

The most extreme example of a company "built around CATL" is Putailai. In 2012, Feng Liang, a fund manager with 18 years of experience overseeing more than 10 billion yuan in assets, decided to plunge into industry. He co-founded Putailai with a former colleague, Wei Chen, who had been ATL's VP of R&D. Starting from lithium battery anodes, Putailai acquired a series of upstream and downstream critical materials companies through a string of capital maneuvers.

It first entered CATL's supply chain by acquiring Dongguan Kaixin, then poached Suning Feng, the technical soul of Shanshan's lithium battery division. It later sold Dongguan Kaixin's electrolyte business to Tinci while also branching into ENM's separators and Lead's lithium battery equipment. Industry insiders even jokingly called it "CATL's designated supplier." Putailai went public in 2017, just five years after its founding, at one point surpassing 100 billion yuan in market cap. Liang transformed overnight into a "lithium battery tycoon" worth 30 billion yuan.

The development trajectories of these emerging industry leaders reveal an important truth about industrial investment: in hardcore industries with long supply chains, whether an upstream hard-tech company can become an indispensable part of a chain master's system is key to its success. This is not some special logic unique to Chinese industrial investment, but rather an inherent characteristic of manufacturing with multiple interlocking steps. In the early days of China's manufacturing modernization, the "systems" role was played mainly by large multinationals like Apple, Intel, and ATL. And these industrial giants themselves had chain master systems supporting them when they were startups. ATL earned its first bucket of gold from Apple iPod batteries; IBM opened up its entire PC architecture to Intel, bringing the chipmaker into the personal PC market; and the famed TSMC owes its success not only to group strategic investment but also to a crucial behind-the-scenes player — Dutch company Philips.

In the semiconductor chip field, China's hottest industry in recent years, embedding oneself within a system is equally critical for startups' smooth development. This involves not just orders, but technology transfer that can be a matter of life and death. In 2019, 62-year-old Dongsheng Wang stepped down from BOE, the undisputed global leader in semiconductor display, and joined Beijing Eswin Technology. Founded as early as 2016, Eswin was reorganized after Wang's arrival and entered the public spotlight, with disclosed fundraising exceeding 14.5 billion yuan. It rapidly became a major domestic semiconductor company spanning IC design, silicon materials, and advanced packaging and testing.

BOE's disclosed data showed its top five suppliers accounted for only 16.44% of procurement, indicating a relatively dispersed upstream base populated mostly by industry veterans. But according to China Business Network, roughly one-third of BOE's required chips came from Eswin — a clear signal of its importance. Earlier, to solve the chokepoint problem of power management chips for displays, Lenovo had joined BOE in a joint effort with Eswin on power driver chips, providing detailed usage guidance and standards. This enabled Eswin chips to grow rapidly and challenge the monopoly of American companies like TI and ADI.

For upstream technology companies in manufacturing, entering a chain master's system means getting the chance to stand on a giant's shoulders and walk alongside them. Conversely, missing that connection can send a company into "hard mode."

In August 2017, Huazhong Technologies spent 380 million yuan to acquire Jingshi Electromechanical, a company making lithium battery testing automation equipment. At the time, Jingshi's largest customer was CATL, and Huazhong used the acquisition to break into CATL's supply chain. In February 2021, Huazhong announced that Jingshi had received a bid notification from CATL for lithium battery production equipment totaling approximately 499 million yuan. The news sent the company's stock soaring — from 10.7 yuan to a high of 37.3 yuan, with cumulative gains exceeding 270% over nearly 100 trading days.

Yet just seven months later, Huazhong announced that due to changes in project location, technical requirements, and Jingshi's production capacity scheduling, the original 480 million yuan CATL order had been canceled. The market didn't buy the explanation: the stock hit its limit down the next day, with 1.6 billion yuan in market value evaporating. That lost order had represented 41% of the company's 2020 revenue.

Shortly after this order was won and lost, when news broke that CATL would be launching a new energy storage project, an investor urgently asked Huazhong whether it would actively pursue a major order from this new project — to mitigate the reputational damage and harm to investors from the canceled order. Huazhong's public response: the company would actively track CATL's project investment progress and strive for more order opportunities.

The Never-Ending Question of Survival

On October 15, 2020, a corporate registration change at a Shenzhen-based company less than five years old caught the capital markets' attention. Huada BeiDou, as it was called, added five new shareholders — one of them BYD. This marked the first industrial investment for BYD, which at the time described itself as an "investment novice."

Huada BeiDou was unambiguously a domestic chip R&D and manufacturing company. According to an ABI Research report, it was the only company in mainland China to make the international top 10 rankings for two consecutive years, and it held multiple industry firsts: the first to successfully mass-produce a BeiDou dual-frequency SoC chip for domestic smartphones; the developer and mass producer of the world's first multi-system, multi-frequency high-precision SoC chip supporting the new-generation BeiDou-3 signal system. This made Huada BeiDou the undisputed leader in China's BeiDou GNSS satellite navigation and positioning chip sector, with world-class technology.

Prior to this deal, BYD Semiconductor had just completed an internal restructuring, establishing two main pillars — new energy vehicle chips and industrial/consumer chips — with the determination to fully compete in the semiconductor space. Its investment in Huada BeiDou was specifically aimed at the latter's GNSS satellite navigation and positioning chip design capabilities, which could synergize with BYD's automotive business to build out its own in-vehicle supply chain.

Although BYD had begun assembling R&D teams as early as 2005 and gradually built up a complete IGBT chip design and manufacturing chain, the "chip shortage" remained a chronic ailment for China's new energy vehicle sector. Li Xiang, CEO of Li Auto, once offered a vivid metaphor: "The competition among smart EV companies is a marathon, but there's an elimination round every four kilometers." Put more dramatically, Chinese automakers suffering severe chip shortages were like marathon runners who might be running fast but could never predict when their "chip" heart condition might strike.

If upstream companies accept investments from chain leaders to gain access to systems, secure orders, and advance their technology to solve their own survival risks, then for the chain leaders themselves, the fundamental motivation for making these investments is identical: survival — moving toward a more secure supply chain.

Over the past year, at least eight semiconductor companies have gone public, including SMIC Integration, Southchip Technology, Jingsheng Semiconductor, Motorcomm, SmartSens, Huali Microelectronics, JoulWatt, and Kingstone Technology. These companies span different segments of the semiconductor supply chain, but they share one common investor: the fund established under the leadership of domestic wafer foundry giant SMIC — SMIC Capital.

According to ZERONE data, as of May 2023, SMIC Capital had invested in over 240 companies, 39 of which had listed on A-shares. The follow-on funding rate for SMIC Capital's portfolio companies reached 63%, well above the industry average.

For SMIC, investing heavily in semiconductor companies was about far more than investment returns — it was about the complete chain these companies helped build together. SMIC Capital's mission was explicit: full industrial chain layout for integrated circuits.

According to SMIC's financial reports, through cooperation with upstream and downstream supply chain partners, the company could both expand its customer base and "provide customers with comprehensive, integrated IC solutions," thereby enhancing market competitiveness. For wafer foundries, economies of scale in production capacity and supply chain synergy capabilities had become key factors for customers evaluating supply chain stability and completeness.

CATL's earliest external investment was in 2016, when it invested tens of millions of yuan in Pulead. At the time, Pulead's main products included lithium cathode materials, lithium iron phosphate batteries, and lithium iron phosphate materials — occupying a crucial upstream position in the new energy supply chain, integrating upward into cells and key raw materials, and downward providing customized power battery system solutions for new energy vehicle applications. This investment not only gave CATL control over upstream cathode material supply but also bound it to downstream vehicle manufacturers.

From these cases, a clear pattern emerges: the core needs of chain leaders' industrial investments are closely tied to their own business development stages and the characteristics of advanced manufacturing supply chains — that is, having addressed their own survival crises to some degree, they use one hand to ensure upstream supply chain security while using the other to open new growth curves downstream.

This also helps explain why second-tier power battery companies such as CALB, Gotion High-tech, Sunwoda, EVE Energy, and Svolt have not yet conducted large-scale upstream and downstream equity investments domestically — the key factor being that they have not yet reached true chain leader status.

In recent years, as leading companies across various sectors have seen their businesses increasingly overlap, their industrial investment trajectories have shifted and penetrated ever deeper into each other's territories.

In 2021, CATL invested in six new vehicle makers in succession. The most eye-catching was Avatr Technology. Avatr combined the respective strengths of Changan, Huawei, and CATL to jointly create the CHN intelligent electric vehicle technology platform. The combined reputations of the three made it easier to establish market footing. This also represented CATL's most direct challenge to BYD to date, following pressure on its core business.

From copper, cobalt, lithium, and nickel ore resources to lithium salt materials and cathode materials, CATL had invested across nearly the entire upstream spectrum. And to avoid being constrained by others in the future, it began investing downstream into vehicle manufacturing. Through its indirect route to carmaking via Avatr, CATL obtained crucial chips for participating in the new energy vehicle race. On one hand, CATL used investments to bind downstream companies to its battery supply. On the other, it continuously expanded new businesses, with cooperation with automakers no longer limited to battery supply and technology but extending into areas like battery swapping.

Meanwhile, BYD was also extending its reach upstream. In 2021, BYD took a stake in Shu'neng Mining, formed to comprehensively develop phosphate rock resources and lithium iron phosphate projects in Mabian County. Subsequently, it also invested in photovoltaic equipment manufacturer Jinshi Energy, materials company HEF, and established FAW FinDreams New Energy Technology with FAW, primarily planned to produce BYD's "Blade Batteries" for FAW's new energy vehicle models.

Additionally, Xiaomi, which had entered vehicle manufacturing, invested in battery companies including Svolt, Ganfeng Lithium, and WeLion New Energy. And Huawei, which declared it would "not make cars," was unusually active in the new energy track, investing in WeLion New Energy and Zhongke Haina among other battery companies.

Beneath this series of investments that appeared to follow expansion logic, the survival imperatives of these industrial giants remained visible. CATL's investment in automakers stemmed from the need to deploy new battery integration technologies; within Xiaomi's smart ecosystem, vehicle manufacturing was a crucial component, and batteries were key to new energy vehicles.

In fact, China's lithium batteries truly established dominant international position starting with power batteries for new energy vehicles. The battery is the largest system; the electric control system is the second largest, and the most critical technology within electric control is the chip. Thus, semiconductor chips, new energy, and high-end manufacturing industries are intertwined, ensnaring the large enterprises within them in industrial chains where pulling one thread affects the entire body.

After Coming Together

"Hubble Investment was founded specifically in the context of Huawei being sanctioned by the US." At Huawei Connect 2020, rotating chairman Guo Ping explained the company's original intent behind establishing Hubble Investment. In China's industrial circles, Hubble Investment is unquestionably one of the most closely watched names. Its creation violated Ren Zhengfei's "three no's" principle — no data, no applications, no equity investment — yet it had reasons it could not avoid being born.

A year earlier, at the moment Huawei was placed on the US Entity List, securing an industrial ecosystem that was "autonomous, secure, and controllable" had become urgent. Hubble Investment emerged to meet this need. It was led by Bai Yi, president of Huawei's Global Financial Risk Control Center, with senior executives including Zhou Yongjie, chairman of HiSilicon Semiconductor, and Ying Weimin, former president of Huawei's wireless network R&D.

Since its founding in 2019, Hubble Investment has invested in nearly 100 companies, with more than 10 portfolio companies going public. Particularly in the first half of this year, the analog IC manufacturer Maxic Technology (in which Hubble holds approximately 5.87%, with a market cap of about 7.4 billion RMB) and the semiconductor testing firm Skyverse (approximately 3.3%, market cap around 24 billion RMB) completed their IPOs, generating substantial growth in book returns.

Behind Hubble Investment's "passive rise" runs an important undercurrent in the survival logic of Chinese industrial investment: international competition.

The 2019 Global 500 list was even described by Fortune magazine under the headline "This Is China's World" — for the first time, 129 of the world's 500 largest companies came from China, surpassing America's 121. In sectors from internet to automotive to engineering, Chinese companies on the list outnumbered their American counterparts. Today, these figures have only grown larger.

According to An Yong Waves (暗涌Waves), Hubble Investment currently concentrates on chip semiconductors and supporting industries for terminal products, spanning semiconductor equipment and materials, EDA chip design tools, third-generation semiconductors, and communications RF chips — covering nearly every link in the industrial chain. For instance, it has invested in EDA software vendors including NineCube, Feipu Electronics, and Arcas Microelectronics; upstream semiconductor equipment suppliers such as Keyi Hongyuan and Jingtuo Semiconductor; and photoresist manufacturers including Fuyang Xinyihua and Bokang Information — all considered "chokepoint" segments.

Looking across the history of large Chinese enterprises as primary equity investors, internet CVCs have been the main force for the past two decades. According to one data point, internet companies founded after 2011 began investing on average just two years after establishment, while traditional companies took 14 years to reach that stage.

As early as August 2005, shortly after Tencent's Hong Kong IPO, Pony Ma put forward a strategic vision called "online life": Tencent hoped to comprehensively satisfy people's needs at every level of online living, aspiring for its products and services to integrate into daily life as seamlessly as water and electricity. This forward-thinking idea was once criticized by media as "losing focus on development." To realize this vision, Ma recruited Martin Lau from Goldman Sachs, giving him a title unprecedented at Tencent — "Chief Strategy Officer" — to manage three things no one else was handling: strategy, M&A, and investor relations.

Just six months after Lau joined, Tencent harvested the most important fruit in its investment history: Lau led the acquisition of Foxmail, whose founder was Allen Zhang, later known as the father of WeChat. Later, at a general management meeting, Ma asked 16 executives to identify Tencent's core capabilities; they ultimately converged on traffic and capital.

Internet companies' business chains are inherently short enough that strategic investment and M&A represent a more cost-effective means of expanding business and thereby growing market cap. Plus, the internet was naturally seen as relevant to all industries. The core of "industrial investment" in that era was an expansion logic, an expression of an "infinite game" worldview.

Unlike internet CVCs, manufacturing-focused industrial investment does not primarily aim to expand territory and boundaries, but to grasp the lifeline of the industrial chain — maintaining precarious supply chain security. In an environment where international competition has fundamentally shifted, this can quickly determine a company's survival.

Yet viewed from the opposite angle, neither investors nor investees in industrial investment can rest completely easy. Symbiosis between the two parties was an ideal state from the very beginning, and when ideals meet reality, brutal commercial logic quickly casts its shadow.

In Q1 2023, CATL recorded 89 billion RMB in revenue and 9.8 billion RMB in net profit, making it a newly minted "money printing machine" in the global electric vehicle industry. But in that same quarter, CATL's accounts payable and notes payable grew by nearly 40% year-over-year.

This means it can "freely" obtain cheaper components and raw materials from upstream, with longer payment cycles. By contrast, its top suppliers saw varying degrees of growth in accounts receivable. For instance, cathode material maker Changyuan Lico's Q1 net profit plummeted 99.7% year-over-year; electrolyte producer Tinci Materials pre-announced that its annual net profit would be cut in half; and graphitization leader Shangtai Technology shut down a production base that had operated for nearly 15 years.

At the 2022 World Power Battery Conference, GAC Group chairman Zeng Qinghong put it bluntly: "Battery manufacturers have taken all the profits. GAC has been working for CATL." Yuqun Zeng, sitting in the audience, showed not a flicker of expression.

For most investee companies, being selected by a chain master is certainly something to aspire to. But this does not mean that enterprises on the industrial chain then live comfortable lives. Once removed from a supplier list, the short-term blow to operating performance and stock price is severe. After all, not every company can be as fortunate as Sunwoda, which after being dropped from Apple's supply chain managed to hitch itself to Xiaomi, continued growing, and was later invited back into Apple's system.

Compared to financial investment, the industrial investment ecosystem is far more intricate. Investors need deep understanding of specific industries' development to discover suitable investment opportunities along the industry's lengthy chain. And because of the interweaving of every industrial link, post-investment synergy, empowerment, and cooperation carry importance equal to or even greater than capital itself.

On August 9 this year, BYD rolled off its 5 millionth new energy vehicle, and for a moment the video "Only when we are together are we Chinese automakers" flooded social media feeds. Two days later, Great Wall Motors CTO Wang Yuanli responded through his personal Weibo: Chinese automakers must face the reality of competition. "Honey on the lips, arsenic in the heart — better to fight first, then come together."

In an increasingly tense international environment, the uplifting sentiment of "coming together" may temporarily move people, but as Chinese commerce matures step by step, reason must ultimately prevail over emotion. For every participant in industrial investment, simply "being together" is clearly far from enough. What it truly points toward is the upgrading of entire industrial capabilities and efficiency, the ultimate realization of independent innovation and development — being together, surviving, becoming better.

---

References:

[1] Zheng Yonggang's Business Empire: Fashion, Lithium Batteries, and a Financial Kingdom [2] China's Lithium Battery Industry: Twenty Years to Get a Seat at the Table [3] Haiping Hu's Half-Step Life [4] Three Charts to Understand CATL's Investment Empire [5] "Battery King" Yuqun Zeng: His Ningde and His Era [6] Chinese NEV Manufacturing: One Last Battle to Win [7] He Built From Nothing, Lived in a Warehouse for Three Years, and Made His Lithium Equipment Company Industry Leader in Five [8] Tencent's Decade of Investment Wanderings [9] China's Hidden Champion: Tinci Materials

Image source | IC Photo

Layout | Guo Yunxiao

An Yong · 2023 Industrial Future Conference

Scan QR code or click "read more" at the end of the article for details