China's top AI chip developer Cambricon slashes autonomous driving unit in secon...

China's top AI chip developer Cambricon slashes autonomous driving unit in second round of job cuts

China's top AI chip developer Cambricon slashes autonomous driving unit in second round of job cuts

Aron Chen

posted on July 29, 2023 6:10 pm

Cambricon Technologies has taken drastic measures in response to its financial challenges and the US trade blacklist. The company has recently laid off nearly half of its workforce at its self-driving chip unit. This move comes as Cambricon faces difficulties in achieving profitability and navigating the repercussions of being placed on the US trade blacklist, which has impacted its business operations and access to certain markets.

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Cambricon Technologies, one of China’s top artificial intelligence (AI) chip developers, have laid off nearly half the worker at its self-driving chip units after the large-scale layoffs in April this year,

This round of layoffs has heavily impacted the smart car chip business of Cambricon Technologies, with the unit called SingGo being the main focus. According to a former employee at SingGo, almost half of the software department's staff has been laid off, while only a few employees in the hardware department remain for the necessary follow-up work. Furthermore, new projects have been suspended, and there is a possibility that they may be abandoned in the future.

The recent lay-offs at Cambricon represent the company's second round of workforce reductions in the current year. This decision follows Cambricon's placement on a US trade blacklist in December of the previous year. The US government's concerns were centered around the possibility of technology diversion to the Chinese military.

In April of this year, Cambricon Technologies was exposed to news about employee layoffs.

Several Cambricon employees posted on social media, claiming that they were terminated by the company in violation of regulations, denied their year-end bonuses, and disagreed with the unilateral termination of labor contracts.

In response to this, a representative from Cambricon stated that the company's performance-based evaluation is a common and standard management practice, as well as a measure for the continued healthy development of the enterprise. They asserted that terminating labor contracts based on performance evaluations and providing N+1 compensation does not violate labor regulations.

Cambricon XingGe (Nanjing) Technology Co., Ltd., commonly known as SingGo Technology, was established in 2021 and is primarily engaged in the research and development of intelligent driving chips. During the 2021 World Artificial Intelligence Conference, Chen Tianshi, the Chairman of Cambricon, officially disclosed the basic information about SingGo’s intelligent driving chip, including its computing power exceeding 200 TOPS and being built on a 7nm process technology.

SingGo Technology received significant investments from prominent companies such as NIO, SAIC Motor, CATL (Contemporary Amperex Technology Co. Ltd.), among others. In 2022, the company secured strategic investments from Lenovo and Bosch.

Last September, SingGo unveiled three autonomous auto chips for Level 2 to Level 4 functions.

Founded in 2016 by Chen Tianshi, a researcher at China's top research institute, the Chinese Academy of Sciences, Cambricon quickly gained recognition as one of the country's most prominent tech unicorns. With its pioneering innovations in the field of chip technology, the company was positioned as a potential competitor to leading global chip manufacturers like Intel and Nvidia.

Cambricon faces challenges not only in terms of being affected by technology restrictions but also in terms of commercialization issues.

In its early stages, Cambricon primarily generated revenue through licensing terminal intelligent processor IP and established a significant partnership with the major client Huawei. However, things took an awkward turn in 2019 when Huawei began using its self-developed NPU (Neural Processing Unit) processors in their in-house designed chips, which impacted the collaboration between the two companies. This shift posed a challenge to Cambricon's business model and revenue stream from Huawei's licensing.

As a result, Cambricon had to explore new avenues and adapt its strategy to address both technological limitations and the changing dynamics in the market to find ways to commercialize its products effectively.

Apart from its IP licensing business, Cambricon has diversified its product offerings into various segments:

Cloud Product Line: This includes cloud intelligent chips, accelerator cards, and complete training systems for cloud-based applications.

Edge Product Line: In this segment, Cambricon offers edge AI chips and accelerator cards catering to edge computing applications.

Intelligent Computing Cluster System Business: Cambricon provides intelligent computing cluster systems to support various AI workloads.

Despite these efforts, in 2022, Cambricon's most substantial revenue source, the intelligent computing cluster system, experienced only a modest year-on-year growth of 0.64%. Therefore, the company urgently needs to find new revenue sources to ensure sustainable growth.

This is one of the reasons why Cambricon sought to enter the automotive sector through SingGo Technology. In recent years, the automotive industry has been rapidly moving towards electrification and intelligence, leading to a substantial increase in the demand for intelligent chips to support various automotive applications. By expanding into the automotive domain, Cambricon aims to tap into this growing market and diversify its revenue streams.

In July 2020, Cambricon raised approximately 2.58 billion yuan (equivalent to US$360 million) through its initial public offering (IPO) on Shanghai's tech-focused Star Market. Despite this substantial funding injection, the company has faced challenges in generating profits over the last few years. In the past year, Cambricon reported a substantial net loss of 1.26 billion yuan, indicating a continuing struggle to achieve profitability. Comparatively, in the preceding years of 2020 and 2021, the company also experienced net losses of 824.9 million yuan and 434.5 million yuan, respectively.

Cambricon explained that the expansion of their losses was primarily due to increased research and development (R&D) investments in order to ensure high-quality iterations of their "cloud-edge-end" chip products and foundational software platforms. They emphasized the need to maintain a technological advantage in the fiercely competitive market. In their quest to stay ahead in the market and keep their products technically superior, the company decided to allocate more resources to R&D, leading to higher operating costs and, consequently, a temporary increase in losses.