Semiconductor Industry in China

Semiconductor Industry in China

In the global semiconductor market, China has been viewed as a customer-rich end market and the “world’s factory” for a long time. In 2013, China’s semiconductor consumption market grew by 10.1% to reach a new record of 55.6% of the global market.

It is said that today China spends about $37 billion to import ICs, which is the same amount they spend on crude oil. The exceptional growth of the semiconductor industry in China is likely to continue for the next decade. However, the landscape of China’s semiconductor industry is expected to change considerably, which will bring opportunities to the global semiconductor industry. Some of the changes are:

Change No.1 Market-driven Policy:

In China, The National IC Industry Investment Fund is a new approach to attract private investors to support different segments in the IC industry such as design, manufacture, and packaging.  The fund will be managed based on a market-driven approach. Investors who demand tangible results and real returns on investment will oversee the funds to invest in fables, foundries, and/or research institutes within China. The central government of China has budgeted about $48.3 million to set up this fund and local governments are expected to follow this trend to form smaller funds in their region to support the specialized area of the IC industry. The abundant resources in China and the strong determination of policy makers to develop an extensive IC industry in China shows that China is planning to be more than just the “world’s factory”.

Change No.2 International Cooperation in R&D:

Recognizing that partnership with global technology companies is a great way to advance technology and the talent pool for local Chinese companies. A recent example is SMIC (Semiconductor Manufacturing International Corporation), Huawai, imec and Qualcomm have joint investment on SMIC’s new company focuses on research and development. This new company will help to facilitate a closer cooperation between upstream and downstream companies, leading edge R&D, and other synergies in the industry’s global eco-system. The goal of the partnership is to develop 14 nanometer CMOS technology for mass production and it is expected to facilitate the mass production of 16/14nmICs by 2020.

Change No.3 Merger and Acquisition:

Another area where the investments from China are likely to impact the global IC industry is in mergers and acquisitions, especially international deals. Not long ago, Uphill, a Chinese investment firm, which specialized in the IC industry, bought ISSI after a long battle with Cypress. In addition, the rumor of Tsinghua Unigroup, a state-owned high-tech company of China, is proposing to buy Micron with $23 billion was on many news sites earlier this week. If the deal goes through, it would be the largest Chinese takeover of a U.S. company. For semiconductor technologies, which require a lot of investment, it would be very difficult for Chinese players to build a complete and competitive industry within the value chain. With all the ongoing mergers in the global semiconductor industry, it would not be a surprise to see more players with Chinese names.

The size of the Chinese market is too large to ignore. Any changes, even a minor one, will cause a chain reaction on a global scale. In the semiconductor industry, the changes that are happening in China are definitely going to impact the industry on a broader level.

For investors, with the government-backed investment plan into China’s major semiconductor industries, there are a lot of potential opportunities for potential investors to capital on. For OEMs, there will be more options on chips to use. For EMS companies, closer distances between the manufacture and chip companies allows for a possible savings in operation, taxes and shorter lead-times. For distributors, the opportunity comes with the distribution of chips that are manufactured in China globally.

With the size and multiple layers of the Chinese semiconductor market, it is hard to generalize a strategy that will fit all stakeholders’ needs and visions. At Advanced MP Technology, our already established offices and warehouse in Shanghai and Shenzhen, our global distribution network, and our extensive industry connection allows us to be ready to support customers and suppliers in the greater China region with the valuable service.