Chinese search giant Baidu is in talks to raise money for a standalone artificial intelligence semiconductor company, a person with knowledge of the matter told CNBC.
The move is emblematic of an ongoing push among China’s biggest technology firms to boost their prowess in the chip sector. And for Baidu, it marks a further effort to diversify its business well beyond advertising.
Baidu’s Nasdaq-traded shares jumped more than 3.5% after hours. They climbed 6.67% on Tuesday.
Baidu’s chip company would be a subsidiary, with the search giant likely to be the majority shareholder, the person said. Venture capital firms GGV and IDG Capital are involved in early stage discussions to invest in Baidu’s chip firm, the source added. Both firms have extensive investments in China.
Baidu declined to comment when contacted by CNBC. IDG Capital was not immediately available for comment. Calls to GGV’s offices in Singapore, Shanghai and Beijing went unanswered.
Currently, Baidu has an in-house chip unit that has helped to develop its Kunlun semiconductors, designed to process huge amounts of data for artificial intelligence applications. But a standalone chip company is seen helping Baidu to better commercialize its technology, the source said.
The semiconductor business would aim to sell chips to customers in several industries including automakers, which are currently facing a global chip shortage.
A standalone chip maker could also tie into other parts of Baidu’s businesses, such as its driverless car software.
Diversification flurry
Baidu’s move is part of push by the company to diversify its broader business — an effort which since September alone has seen the Chinese technology giant raise money for a biotech firm and a standalone electric vehicle company.
Advertising accounts for most of Baidu’s revenue currently, but other operations are contributing a growing percentage of sales. Ad-related revenue, which the company refers to in its earnings statements as online marketing services, accounted for around 80% of total revenue in 2018. That proportion fell to 71% in the third quarter of 2020, the most recent published results.
Baidu’s semiconductor focus comes as the Chinese government tries to boost domestic independence around that critical technology — a trend that has accelerated during China’s trade war with the United States.
Chinese internet giant Tencent, the owner of messaging app WeChat, recently invested in an AI chip start-up.
In 2019, e-commerce company Alibaba launched its first chip to power artificial intelligence processes.
