Dreams Of A Domestic IC Industry Elude China
It’s a funny thing that though China has been trying to establish a domestic semiconductor industry for 30 years, it has almost completely failed.
China-based IC production was only about $8.9 billion in 2012, says IC Insights, and most of that was done by foreign companies.
And foreign companies’ share of China-based IC production is rising fast.
IC Insights reckons that foreign IC companies making ICs in China will represent 70% of China’s IC production in 2017 – up from 58% in 2012
Although China has been the largest individual market for ICs since 2005, IC production in China represented only 11.1% of its $81 billion IC market in 2012.
Moreover, IC Insights forecasts that this share will increase only about three percentage points to 14.4% in 2017.
China’s total IC production is forecast to represent only 6% of the worldwide IC market in 2017.
That China-based IC production will grow 17.6% CAGR 2012-2017 is mainly thanks to Intel, Hynix and TSMC.
In 2012, SK Hynix, TSMC, and Intel were the major foreign IC manufacturers that had significant IC production in China. In fact, SK Hynix’ China fab had the most capacity of any of its fabs last year.
In 2012, Intel continued to ramp-up its 300mm fab in Dalian, China (it started production in late October 2010), which is expected to give a noticeable boost to the China-based IC production figures over the next few years. This fab currently has an installed capacity of 30,000 300mm wafers per month with a maximum capacity of 52,000 wafers per month.
In early 2012, Samsung gained approval from the South Korean government to construct a 300mm IC fabrication facility to produce NAND flash memory in Xian, China.
Samsung started construction of the fab in September of 2012 with production set to begin in the first half of 2014. The company expects to invest $2.3 billion in the first phase of the fab with $7 billion budgeted in total. This facility is targeting NAND flash production using a 10-19nm feature size process technology.
If China-based IC production rises to $20.0 billion in 2017 as forecast, it would still represent only 5.6% of the total forecasted 2017 worldwide IC market of $359.1 billion. Even after adding a significant “markup” to many of the Chinese producers’ IC sales figures (since many of the Chinese IC producers are foundries that sell their ICs to companies that re-sell these products to the electronic system producers), China-based IC production would still represent less than 10% of the global IC market in 2017.
Historically, the lack of consistent intellectual property protection has been a major deterrent for foreign firms seeking to establish state-of-the-art IC fabrication facilities in China.
The lack of intellectual property protection is also a reason many large fabless IC suppliers (e.g., Qualcomm, Broadcom, etc.) have not brought leading-edge IC designs into China for the indigenous Chinese IC foundries to manufacture.
It should also be noted that, thus far, Chinese IC foundries have also been unable to offer large amounts of IC production using leading-edge feature sizes.
IC Insights believes that the future size of the IC production base in China is more dependent upon whether foreign companies continue to locate, or re-locate, IC fabrication facilities in China than on the success of indigenous Chinese IC producers (e.g., SMIC, Hua Hong Grace, etc.).
As a result, IC Insights forecasts that at least 70% of IC production in China in 2017 will come from foreign companies such as SK Hynix, TSMC, Intel, and Samsung.Tags: domestic semiconductor industry, funny thing, ic insights, individual market, xian