Bloomberg reported in November that Graphcore had to pull out of China in the face of U.S. export controls.
The British chipmaker will lay off most of its employees in China and halt sales in China, another setback for an already struggling company.
Recent updates to U.S. export controls mean that Graphcore, like other AI hardware manufacturers, will no longer be able to sell IPU systems in China. Unfortunately, this means that we will significantly scale back our business operations in China," the company said in a statement.
Graphcore is particularly known for its Intelligent Processing Units (IPUs), which are touted as potential competitors to NVIDIA GPUs. Despite being competitive in chip performance, the company struggled to keep up with Nvidia's growth.
In July 2023, Gcore launched an AI cloud cluster in Newport, Wales, using the Graphcore IPU, after similar POPs had already been deployed in the Netherlands and Luxembourg. But the company's development has not been smooth.
Both investors had previously written down their investments in Graphcore significantly because the company struggled to gain a foothold in the AI chip market despite the company's huge investment in AI. The company's operations in China were also shut down due to U.S. controls on the sale of artificial intelligence technology, which also hit the company hard.
Now, the latest news has come out that this chip upstart is considering selling.
Graphcore, the UK's champion microchip company, is reportedly considering giving it to foreign owners after struggling to profit from the AI boom.
According to industry sources, Graphcore has been in discussions with big tech companies about a potential deal to seek to raise new capital to cover significant losses.
Senior investors in the Bristol-based company have also significantly increased the value of their stake in the company, which could suggest that the deal could be worth more than $500 million (£400 million).
As AI technology comes under increasing scrutiny, any bidder who bids overseas is likely to be scrutinized, and AI technology is seen as a strategic priority.
With the rise of systems like ChatGPT, tech companies and ** are spending billions of dollars to secure ** for thousands of processors.
Graphcore has been trying to challenge giants like NVIDIA with microchips that specialize in AI software, and the company said last year that it needed fresh funding after a 46% drop in revenue and widening losses.
The company is in discussions with investors to raise capital, but is believed to be having difficulty raising new cash.
According to the accounts filed by the Companies Registry, the company was expected to complete a new round of financing in the third quarter of last year, but it has not been disclosed.
Rumored buyers include British microchip company Arm, Japanese tech group SoftBank, and OpenAI, the startup behind ChatGPT. The companies declined to comment, while sources said Arm was not involved in the discussions.
It is unclear how any ** discussion goes, which may coincide with independent fundraising negotiations.
London-listed investment** Chrysalis, which holds a stake in Graphcore, said in December that an unnamed company in its portfolio was**. A few weeks later, the valuation of its Graphcore stake more than doubled, and analysts at Zeus Capital said it could have something to do with the company. One investor calculated that this brings Graphcore's valuation to 5$2.8 billion.
In recent weeks, investment manager Baillie Gifford has also more than doubled the valuation of his stake in Graphcore.
Both investors had previously written down their investments in Graphcore significantly because the company struggled to gain a foothold in the AI chip market despite the company's huge investment in AI. The company's operations in China were also shut down due to U.S. controls on the sale of artificial intelligence technology, which also hit the company hard.
Bristol-based Graphcore has raised more than $700 million from investors such as Microsoft and Silicon Valley venture capital giant Sequoia Capital, and last raised money at the end of 2020 at a valuation of $2.8 billion.
However, the company has struggled with sales of its "smart processing units," which are competitors to the graphics processing units sold by Nvidia, which were in huge demand during the AI revolution and made Nvidia one of the most valuable companies in the world.
NVIDIA's market cap surpassed Amazon and Google parent Alphabet last week, bringing the company's market cap to 1$8 trillion.
Graphcore said last year that its loss in 2022 increased by 11% to 2$4.6 billion, while revenue fell from $5 million to $2.7 million. The company said that at the end of the year, the company had 1$5.7 billion in cash and needs to raise more by May. The statement on going concern in the accounts said the company was in discussions with potential investors.
The accounts, which were later refiled to correct clerical errors, showed that the company had previously expected to raise capital in the third quarter of 2024.
The recent boom in artificial intelligence has meant that semiconductor companies need to spend huge sums of money to develop high-end chips. "Graphcore has raised more than $600 million, but they need more than twice as much to compete with spending from Intel, NVIDIA, AMD and others," analysts at chip industry expert John Peddie Research said in a recent report. ”
The company has laid off employees and closed its international offices in an effort to cut costs.