The overwhelming theme of the SEMI Industry Strategy Symposium in Half Moon Bay this week was China. On day number two Sunny Hui, SVP of SMIC, did one of the best overviews of the China market I have seen, absolutely. While I’m not allowed to post the presentation in its entirety I can post up to three slides (the prettiest ones) and summarize the rest.
In regards to the growth engine of the global economy, there are six market segments that interest us semiconductor folks the most. Here are the China consumer shipments and China’s worldwide market share in 2014 of those six:
Remember, population is the driving force for semiconductor demand and China is experiencing the fastest total growth in human history. The US actually has the fastest growth percentage in the last ten years at 34% (238 to 319 million) versus China at 30% (1.0 to 1.36 billion). And that is with the China one child policy which was changed to a two child policy in 2015. One of the key population growth drivers in the US is immigration so this is not the time to be building walls.
Today 40% of worldwide semiconductor shipments are to China, the U.S. is getting 14% and Japan is getting 10%. In regards to manufacturing, China dominates electronics manufacturing by a very wide margin and it was pointed out that cheap labor no longer powers China’s manufacturing engine. China manufacturing is highly automated and fully supported by the Chinese Government. I would also have to add that environmental restrictions are not as much of a hindrance as in the U.S. Here are the manufacturing numbers for the top six markets:
Chinese consumer electronics brands are also on the rise and the semiconductor content is inherently Chinese of course: 28% of world wide mobile phones, 24% of LCD TVs, 21% of PC/Notebooks, and more than 25% of tablets. Here are some of the company names you may recognize especially if you were at CES last week: Lenovo, Huawei, ZTE, TCL, OPPO, Hisense, Coolpad, Creative Life, Changchong, Skyworth, Konka, Great Wall, Haier, Tsinghau, and Ramos. And you can bet the chips that power these products are of Chinese origin if at all possible. The recent Huawei smartphone for example:
Moving forward China is spending billions of dollars in ten areas over the next 10 years:
According to Sonny Hui the next big China thing is in fact IoT and big data. Those two go together like peanut butter and jelly of course:
The common theme amongst the China presentations was “joint partnerships”. Hopefully you get the picture here, semiconductor and electronics are part of a very aggressive national charter in China and it is not just economic. The unspoken truth is that semiconductors and electronics are critical to National Security and nobody knows this better than China. And as we all know security starts with silicon so if you want to do business in China you had better get very comfortable with joint ventures.