As a tech reporter, I have heard executives of private equity and venture capital firms say over the past few years that internet and related sectors are their investment priority. But, in recent months, the narrative has changed. My interviews with them revealed that everyone seems to be pivoting to new opportunities in hard technologies and fundamental R&D.

For the uninitiated: hard tech, also known as deep tech, includes optoelectronic chips, artificial intelligence, aerospace, biotechnology, information technology, new materials, new energy and smart manufacturing. The term was coined to denote areas that rely heavily on advanced scientific knowledge, long-term R&D and continuous investment.

According to the annual rankings of the All-China Federation of Industry and Commerce, a national body serving the private sector, in terms of R&D investment, Huawei Technologies topped the 2022 list with a staggering R&D investment of over 160 billion yuan ($21.87 billion).

In fact, Huawei has spent 977 billion yuan in all on R&D over the past decade. Its focus has been on exploring promising, futuristic fundamental technologies — that is, hard tech.

"With the new internet economy being the main growth driver of China's primary market over the past decade, opportunities represented by technological upgrading will lead growth over the next 10 years," said Rachel Mei, partner of Taihecap, a prominent Chinese investment firm, in an earlier interview with China Daily.

"It's been a strong trend in recent times that investment moved from the tertiary industry to the secondary industry, and from model innovation to technological innovation."

In 2022, the nation's draft plan for national economic and social development specified that faster breakthroughs in core technologies like biomedicine, high-end instruments, green and low-carbon energy transformation, and basic software will be prioritized.

Mi Lei, founding partner of Casstar, a Xi'an, Shaanxi province-based high-tech venture capital firm backed by the Chinese Academy of Sciences, said the current global economic downturn and global technology competition will accelerate the trend.

"Hard tech, with extremely high technical barriers, is difficult to be replicated and imitated. So, it is the key to the nation's next round of technological innovations," Mi said.

As part of its investment in hard tech, Casstar has been funding hard tech areas that were not popular with many investors before, like LED chips that are used to deposit thin layers of atoms onto a semiconductor wafer.

"China needs more companies that can champion hard technology, especially those that rank first in verticals globally. Science and technology drive economies these days, and hard tech will be the key driver of growth over the next 30 years," Mi said.