China is to put $50bn into semiconductor-related projects between now and 2020, according to SEMI the trade body for semiconductor production equipment manufacturers.
“News of the ongoing global industry downturn - and the slow progress with China’s foundries, SMIC and Grace Semiconductors - has obscured the aggressive long-term commitment in the semiconductor industry by the China governments at all levels,” said the SEMI report.
"In the past five years, the China government influenced the investment of about $7bn in new fabs. In the next five years, another $20–$25bn will be invested into the semiconductor industry by local governments throughout the country. Going forward, the central government will invest up to $30bn in the industry by 2020,” said SEMI.
According to SEMI, China is now in the third phase of a programme to give it a complete chip-making capability. The first stage in 2000-2005 was getting public/private investments foundries up and running – e.g. Grace Semiconductor, Huanhong, TSMC, Hejian and SMIC; the second phase in 2005-6 was encouraging IDMs like Intel and Hynix to set up in China supported by public money.
The third phase, running up to at least 2010, is the creation of “virtual” IDMs which have three main characteristics: investment from government or state-owned entities, fab operation expertise from established companies such as SMIC, and a marketing/product partner such as Elpida.
An example is the Elpida-Suzhou Venture Group which has a $5bn project in Suzhou starting this year.
Purchasing for these projects is being done locally. “The purchasing process in China has taken a unique Chinese character,” said SEMI, “in addition to technical evaluations, request for proposals (RFP) and request for quotes, multi-discipline delegations and committees are formed that include local government officials and local universities. Government plays a critical role in the decision making process.”
China uses 28 per cent of the world’s output of ICs.