Buying The Past

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Buying the past happens more often than you might think. Especially when bureaucrats are doing the buying. When Japan's government decided to take over the world computer industry in the 1970s, Japan's bureaucrats decided that Japan should build home-grown, vertically integrated, mainframe companies - just as the computer industry was about to go for the PC.

 

 

Now the China government is putting $50 billion into building up home-grown semiconductor IDMs - just as the IDM model is being seen to be a dinosaur.

 

According to a report from SEMI, China is now in the third phase of a $50 billion programme to give it a complete, end-to-end, 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.

 

But why buy into the IDM model when it's on its last legs? You only have to look at the world's IDMs  to see they are falling apart at a rate of knots. So why buy the past?

 

Because that's what bureaucrats do.

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