China's semiconductor strategy

2016-03-30 10:47:34

BY PETE SINGER, Editor-in-Chief

China has become the largest and the fastest growing market in the world. 40% of the worldwide semiconductor shipments go to China and that’s expected to increase to almost 42% in 2019.

The “National Semiconductor Industry Development Guidelines” and “Made in China 2025” were published by China’s State Council in June 2014 and May 2015, respectively. Both policies have already led to a major push in the development of the local IC industry, with investments in semiconductor memories, design, foundries, OSATS, and equipment and materials.

Based on the “National Semiconductor Industry Development Guidelines,” a US$19 billion national industry investment fund has been set up to help local foundries finance the build-up of advanced manufacturing processes, and also to assist local IC firms to form mergers and/or make acquisitions internationally. Dieter Ernst, a Senior Fellow at the East West Center In Hawaii says with this plan, China seeks to move from the catching up stage to a full-scale forging ahead.

With the “Made in China 2025” initiative, China is aiming to improve the self-sufficiency rate for ICs in the nation to 40% in 2020, and boost the rate further to 70% in 2025.

What will be key is how Chinese companies can gain access to 16/14nm, 10nm, and 7nm technologies as well as DRAM and 3D NAND technologies.

According to Handel Jones of IBS, who spoke at SEMI’s Industry Strategy Symposium earlier this year, China is also strongly positioned in 5G. “China will be the global leader in 5G,” he said. Based on an analysis of Huawei, Ericsson, Nokia and others, Jones said Huawei – which is investing about $1 billion/year -- is ahead. “That’s going to have a fairly disruptive effect on the supply chain,” he said. He expects early development in 2017/2018 and then fairly extensive deployment in 2020.

In a recent report, “From Catching Up to Forging Ahead: China’s Policies for Semiconductors,” Ernst points out that while the opportunities for China are real, they all involve considerable uncertainty. “Basic parameters that determine how China will fare may change at short notice and in unpre- dictable ways,” he said. To succeed, China needs to move toward a bottom-up, market-led approach.