Intel CEO’s China Investments Expose Billions in US VC Funding for Military-Linked Chip Firms

Key Takeaways

• Through venture funds he controls, Intel CEO Lip-Bu Tan has invested in hundreds of Chinese companies.
• Most notably, Walden International is a prolific investor in the Chinese semiconductor industry.
• Walden was one of five American VCs investigated by Congress over their China investments.

Intel’s new CEO, Lip-Bu Tan, has invested in hundreds of Chinese tech firms, mostly through his venture capital (VC) firm, Walden International.

In 2023, the House Select Committee on the Communist Party of China (CCP) singled out Walden and four other VC investors for plowing billions into companies with ties to the Chinese military.

Lip-Bu Tan’s VC Investments

While his experience as CEO of Cadence Design Systems helped him secure the top job at Intel, Tan also has decades of experience as an investor.

He founded Walden International with Peter Liu in 1987 as a spinoff from the Walden Group.

At a time of intense competition in the American VC space, the new firm was set up to bring the VC model to underdeveloped Asian markets.

Walden International’s first funds were focused on Taiwan and Singapore, but later, it expanded its coverage to countries such as China, India, Japan, and Malaysia.

Over the years, the firm has invested in an extensive portfolio of Asian startups, with a focus on semiconductors, alternative energy and digital services. However, Walden’s investments in Chinese chipmakers have generated the most scrutiny.

Walden’s Chinese Investments

Walden International made its first Chinese investment in 1995 with the home appliance manufacturer Wuxi Little Swan.

Before long, the firm had established itself as one of the leading American VCs in China. In 2001, it made its first foray into the nascent Chinese semiconductor industry with a seed investment in Semiconductor Manufacturing International Corporation (SMIC).

In the years that followed, Chinese chipmakers like SMIC boomed, helped along by generous government subsidies.

Looking to capitalize on the sector’s growth, Walden launched a $500 million Chinese semiconductor fund in 2017 in partnership with China Everbright Limited.

The Walden-Everbright fund was a prolific investor. Between 2017 and 2020, it backed 25 Chinese semiconductor companies, accounting for more than 40% of all American investments in the sector.

House Committee Scrutinizes China Chip Deals

With American VC and private equity investments emerging as a key source of funding for China’s semiconductor industry, the House Select Committee on the CCP launched a bipartisan investigation into five of the worst-offending U.S. venture firms.

Alongside Walden International, GGV Capital, GSR Ventures, Qualcomm Ventures and Sequoia Capital China were singled out for directing at least $3 billion to critical technology companies with ties to Beijing.

In a letter to Tan, Committee Chairman Mike Gallagher and Ranking Member Raja Krishnamoorthi expressed their “serious concern” about Walden’s semiconductor and quantum computing investments in the country.

The Chinese government “is using advancements in quantum computing and semiconductor manufacturing to support the People’s Liberation Army,” the letter stated. It, therefore, concluded that Walden’s investments, while not directly linked to the defense sector, risked strengthening China’s military capabilities.

The House probe took special interest in cases where American VCs were co-investors with state-owned groups or government-backed investment funds.

For instance, the committee’s letter highlighted Walden’s stake in the chip designer Biren Technology, which is also backed by Chinese and Russian state funds.

Lip-Bu Tan Tied to Sanctioned Chinese Entities

Through Walden International and two Hong Kong Holding companies, Tan controls more than 40 Chinese entities and has minority stakes in over 600, a recent investigation by Reuters found.

Some of the companies he has invested in over the years have been directly sanctioned by the U.S. Commerce Department.

SMIC, for example, was placed on the Bureau of Industry and Security’s “Entity List” in 2020. IntelliFusion, a Walden-backed AI startup that develops facial recognition tools for Beijing’s surveillance apparatus, was also involved.

Given the global nature of the semiconductor industry and China’s emerging role in the supply chain, Tan’s experience as an investor could be a valuable asset for Intel.

But against the backdrop of heightened anti-China sentiment in Washington, his ties to military-linked companies could be perceived as a national security threat given Intel’s critical role in the U.S. chip sector.