By;Kigozi Jimmy Andrew

Graduate School of International Studies, Korea University

www.kigozijimmy.weebly.com

Executive summary

China’s semiconductor industry is a diamond puzzle. A puzzle in a sense that china is the largest consumer of ICs constituting 1/3 of world market share. Despite of this huge market share, production of ICs is still low especially with indigenous firms since 90 percent of China’s IC industry is dominated by foreign firms with more than 90 percent of the manufacturing equipment being imported. In fact, China’s value chain share is only in assembly-and-test and back end manufacturing segments. This has made China miss out on the semiconductor league tables dominated by companies like Intel and Samsung

China’s ability to compete at a global level in its semi conductor industry remains a dream even when the Chinese government has made efforts to build an INDIGENOUS semi conductor industry by providing financial incentives, developing talent and technology and crafting alliances with global players.

Quick facts about China’s semiconductor industry

90 – 90 – 90 (why 90?)

Both consumption and growth in 2011 were 10X more than that of the entire world.

Only 20 percent of domestic market share is satisfied

MTK is the only Chinese brand among the top 10 ranking 8th in the market

Intel18.7%

Samsung6.7%

MTK2.9%

Comparison of China’s integrated circuit consumption and production, 1999–2014

Where is the problem? China exerts little influence on semiconductor design and selection in major product

categories such as mobile phones and laptop computers. Majority of design decisions are made by global champions e.g. Nokia, Acer and Apple (Industry is largely dominated by FOEs)

Home countries of major semiconductor companies ban the export of leading-edge manufacturing technologies to China e.g. US and Taiwan prohibit the export of equipment used to manufacture 65 nanometer process technologies leaving mainland Chinese foundries 2 generations behind the current 32 nanometer standard.

Concentrated clusters of semiconductor excellence failed to fully develop in China. Instead of focusing investments in one location like Taiwan with Hsinchu science park, Chinese government made investments in multiple provinces. Because of the fragmentation, government support did not lead to formation of a vibrant semiconductor ecosystem in any single location

Foreign players own most of the intellectual property throughout the semiconductor value chain. Applied material for instance dominates manufacturing equipment while Intel, Nvidia and Qualcomm control key parts of integrated chip design for microprocessors, video cards and mobile handsets

China’s semiconductor industry by sector 2003–2011

Provinces with semiconductor manufacturing

No. of semiconductor fabrication plants

No. of semiconductor packaging, assembly and test plants

The tables below list the main domestic players in three segments of China‟ssemiconductor industry.

Looking ahead. A supply and demand game

The six categories of products targeted were •Computer and application devices•Communication products•Modernized office equipment•Software•New energy and equipment •Energy efficient products

Further Opportunities

Rise in the real estate business Rise in Health sector New IC assembly and testing technologies including

BGA, SIP, CSP,QFN, and MCM. IC design for telecommunications, computers, network,

digital audio, smart card and industrial control

Do you think Chinese government strategies to revamp the semiconductor industry will yield any fruits?

Opinion: Yes. Its just a matter of time Why?

China’s semiconductor industry grew by 14.4% to reach a record $43.5 billion more than 10X greater than that of the total worldwide semiconductor industry.

Growth of China’s IC design sector from less than $200 million in 2001 to more than $7 billion in 2011—a 45% compounded annual growth rate.

Of the 160 semiconductor wafer fab facilities in operation at the end of 2011, 79 are located in the East China region (64% of capacity).

References

APCO Worldwide. (2010): Market Analysis Report: China’s Electronics Industry

PWC. 2012. Exceptional Relative Performance. China’s impact on the semiconductor industry. 2012 update

PWC. 2009. Exceptional Relative Performance. China’s impact on the semiconductor industry. 2009 update

Thank you