Update: Looking to Take on Dominant U.S. Rivals, Software-Maker Cardinal Raises $31 Million
Chinese software developer Cardinal Operations picked up nearly 200 million yuan ($31 million) in new funding as it attempts to break foreign dominance of an industry that makes specialized software to solve complex business problems.
The successful funding round illustrates how China’s drive to achieve technological self-reliance is benefiting the nation’s technology firms, which have seen demand grow from state-owned enterprises’ (SOE) looking for domestic alternatives to cutting-edge foreign-made hardware and software.
Cardinal’s recently completed series C funding round was led by state-owned investment bank BOC International Holdings Ltd. and followed by private equity investor Tianren Investment Co. Ltd. Cardinal plans to use the proceeds to invest in research, marketing and human resources, according to a company statement (link in Chinese) released Thursday.
Founded in 2016 by four Stanford University doctoral graduates, Cardinal develops mathematical programming solvers, sophisticated industrial software that use mathematical modeling to solve business problems with artificial intelligence-powered algorithms. The goal is to help companies make better and more logical decisions to improve efficiency and reduce costs.
The software can be used in a variety of technology-dependent industries such as spaceflights, transportation and logistics. Cardinal’s clients include JD.com Inc., Xiaomi Inc., Nestlé S.A. and China Southern Power Grid Co. Ltd.
Cardinal said its proprietary mathematical programming solver aims to break the monopoly of foreign software in what is called the optimization solver industry.
The market is dominated by a handful of American companies — Gurobi, IBM-backed CPLFX, and FICO Xpress, a service developed by American personal credit score provider FICO. The three control for more than 90% of the global market.
Before 2019, Cardinal’s clients mostly consisted of private and foreign companies. However, since China-U.S. relations started to deteriorate, the company has been getting a lot more business from Chinese SOEs looking for domestic alternatives to American software.
China’s changing demographics have also spurred demand for optimization solutions. As China’s economy has benefited less from population growth over the last few years, companies have been working to improve efficiency and reduce costs through technology, Cardinal CEO Luo Xiaoqu told Caixin.
Wang Zizhuo, Cardinal’s chief technology officer, said the firm’s products have surpassed their U.S. competitors in simple linear programming capability, but said the company is still trailing more complex integer programming.
Technological innovation is a key focus in China’s Vision 2035 development strategy, which Premier Li Keqiang’s unveiled in March in his annual government work report. Under that strategy, China will pour resources into seven cutting-edge industries including artificial intelligence and semiconductors.
Also, developing domestic alternatives to foreign software has become urgent for Chinese companies and researchers because of U.S. sanctions. In May 2020, the U.S. Department of Commerce added a number of institutions, including Harbin Institute of Technology and Harbin Engineering University, to a blacklist, resulting in students and researchers at the two universities losing access to MATLAB, a widely used programming and numeric computing platform.
Contact reporter Guo Yingzhe (firstname.lastname@example.org) and editor Michael Bellart (email@example.com
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