Transcript A GREAT PUZZLE IN CHINA`S SEMI CONDUCTOR INDUSTRY

CAN CHINA COMPETE WITH GLOBAL
GIANTS IN THE SEMICONDUCTOR
INDUSTRY?
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-andtest 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
Intel
18.7%
Samsung
6.7%
MTK
2.9%
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 leadingedge 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‟s
semiconductor 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