Semiconductor in China: Is 3rd Time a Charm?

China has recently announced extremely ambitious plans for becoming more self-sufficient in semiconductors. Today China is about 1/3 of the worldwide IC market but about 90% of that is imported. Think of something like the iPhone assembled in Shenzen with chips from TSMC, Samsung, Hynix, Toshiba/Sandisk , Micron and more (Taiwan, Korea, Japan and US).

China is already a growing market for IC equipment. This year it will be $5B, 12% of the world market with another $6B for materials, 13% of the world market.

China has actually been involved with semiconductor for a long time, staring with work done in 1964 not long after the original invention of the IC. They have had several attempts to build domestic manufacturing starting in the 1970s importing production lines from Japan. In that era, when a fab was cheap, there were actually many lines established in China, but mostly for R&D and not commercial. In the late 1980s they created the China Electronics Corporation by the then Ministry of Electronics Industry. They had a joint project with Lucent based on a Lucent process, training and design, although it was not truly successful. Then a joint-venture with NEC in 1997 with a 200mm fab. In that era, SEMI predicted 20 fabs in China but that never materialized. In 2000 SMIC was created and was more successful. There is more capacity in China now, 8% of the world total, but about 2/3 of it is overseas companies operating fabs there (Intel, Samsung, Hynix).

In June 2014 China announced a national project to develop a truly domestic IC industry covering IC design, IC manufacturing, advanced packaging and even semiconductor equipment and materials. There are plans to invest $21B with a more market-based structure, and as much as $100B including local funds from Beijing, Shanghai, Wuhan and Hefei.

To start with now the focus is on 32/28nm and medium to high-end assembly and test. They also plan to develop 200mm 45nm and 65nm equipment. From now through 2020 they plan 20% annual growth which, if achieved, will grow the market to $143B which is 3.5X 2013 levels. The roadmap for 14/16nm is in that timeframe.

They have some very specific goals:

• IC manufacturing: mass production for 32/38 nm process shall be realized by 2015 and 16/14 nm process shall be realized by 2020.
  
• IC design: certain key technologies (e.g. mobile smart terminal, network communication) shall approach international first-tier level by 2015, and other strategic technologies shall achieve international leading edge by 2020.
• IC packaging and test: revenue from mid-end to high-end technologies shall be more than 30% of total revenue by 2015, and key technologies shall achieve international leading edge by 2020.
• Material: 12-inch silicon wafers produced in China shall be ready for use in device production by 2015, and enter global supply chain by 2020.
• Equipment: 65-45nm key equipment manufactured in China shall be used into production line by 2015, and enter global supply chain by 2020.

During SEMICON China, SEMI China will host the Tech Investment Forum-China 2015 on March 18th. The Tech Investment Forum has already become an important platform between investment and pan-semiconductor industry in China. This year, Mr. Wenwu Ding, the CEO of China National IC Investment Fund will give a keynote speech.

SEMICON China is March 17-19th at the SNIEC in Shanghai. Kenotes on March 17th in the Kerry Hotel Pudong are by Lisa Su, President and CEO of AMD; Tzu-Yin Chiu, CEO of SMIC; Xinchao Wang, CEO of JCET; Simon Yang, CEO of XMC; Michael Hurlston, EVP worldwide sales for Broadcom; and Lei Shi, President National Fujitsu Microelectronics. Full details are here.