Mainland China's Semiconductor and Equipment Markets: A Complete Analysis Of Technical, Economic, and Political Issues

Mainland China's Semiconductor and Equipment Markets: A Complete Analysis Of Technical, Economic, and Political Issues published by The Information Network in January, 2011. This report price starts from US $ 2495.

Introduction

Abstract

From 2000 through 2005, the Chinese IC market registered a compound annual growth rate (CAGR) of 33% to $40.8 billion in 2005. As China becomes a global production base for electronic terminals, consumer demand for emerging multi-functional, highly integrated electronic products is increasing. Memory, MCUs and DSPs make up 33% in total IC products in China. In 2005, the market demand for these three groups of ICs was worth U.S. $14.6 billion.

Most of the first 200mm production lines established in the mainland have Taiwanese background, with proponents including SMIC, Grace and Hejian Technology. Maintaining low-cost manufacturing capability and providing foundry service for their existing customers are important considerations for Taiwanese enterprises. Price is the top consideration in setting up mainland foundries in addition to being lured by fast-growing markets in the mainland. Nearly 80% of notebooks supplied by Taiwanese ODMs such as Quanta and Compal are manufactured on the mainland.

Domestic companies have made impressive inroads into the development and commercialization of a few specific IC products such as second generation ID cards, audio decode chips, third generation cell phone base band chips and MP3 chips.

China has a total 650 semiconductor companies, with 200,000 employees. In a breakdown, the number of IC design companies in the country approached some 500 at the end of 2005, with an annual growth of sales revenue hitting 61.3% and an employed population reaching 18,000. China' s fab capacity grew 45% from 145,000 equivalent wafers per monthto 210,000, and we expect the same strong growth in 2007.

As Taiwan has shifted electronic manufacturing to the mainland, the mainland' s IC design capability has improved dramatically. For instance, communications ICs are already yielding System-on-a-Chip (SoC)-level products based on 0.13-0.18μm process, while consumer electronics products focus on 0.18-0.5μm process.

There are three major driving forces behind such phenomenal growth. First is the continuing growth of the domestic market that has provided new demand for outputs from the industry. China has become the largest manufacturing base for most consumer electronics products such as televisions, DVDs, personal computers and mobile phones. These consumer electronics products are fueling the growth of the China' s domestic IC market. In 2005, the market reached $40.8 billion, making China the largest IC market in the world with a global share of 22%.

The second driving force has resulted from the reform of the financial system, which has substantially improved the investment environment--especially for foreign investment. Foreign investment now accounts for 80% of total investment in the IC industry, even when domestic bank loans are taken into account.

The third driving force is the global recession of the IC industry after 2000. The recession exerted tremendous economic pressure for multinational corporations to relocate their manufacturing and R&D activities to China to take advantage of China' s cost advantage.

While the growth of China' s IC industry has been impressive, there are noticeable weaknesses of the industry. The industry is dominated by low value-added IC packaging and assembly, which accounts for half of the industry' s revenue. High value-added IC design work only generated 15% of the total revenue in 2005. Most of the 476 IC design companies are very small.

The government is well aware of these shortfalls and policies have been put in place to support the next-phase growth of the industry. Factor inputs need to be boosted. In terms of capital, it is estimated that a total of $30 billion investment will be needed in the coming five years to fuel the growth of the industry. Yet, the government will cede its role as a director investor in any IC programs while promoting investments from other sources, being it bank loans, domestic private investment, foreign direct investment or venture capital investment. Human resource is another prime area for improvement since there is a serious shortage of experienced IC engineers. The government has put in plans to "cultivate 40,000 IC designers and 10,000 IC processing technologists" over the coming 6-8 years. More importantly, however, indigenous competence needs to be built. "Independent innovation" has been identified as a priority for public policy in China' s 11th five-year development plan, whose goal is not to copy others' chips but instead to have its own.

Looking into the future, as China' s IC industry and market continue to grow, China is being integrated into the global innovation system. In the coming five years, there will be plenty of opportunities for Chinese companies and universities to collaborate with innovators from abroad, whether it is to shape next-generation technologies and technical standards, for multinational corporations to set up research and development centers in China, or for universities to collaborate on cutting-edge research.

• 1) After more than 20 years of development, China' s electronics industry has become established as a relatively complete system. The scale of economy is improving continuously, brand images are being formed, and product quality is improving. There is now a solid foundation for the future growth of the industry.
• 2) In China, there is a huge domestic market and a fast-developing economy; overall production costs are falling; the investment environment has become more tightly monitored and controlled; sales and distribution networks are improving; and process manufacturing capabilities have become stronger. Such changes and improvements make China an extremely attractive option to any company considering relocating its manufacturing overseas.
• 3) A new wave of industrialization driven by information technology will open up new business opportunities for the electronics industry to expand its markets. Fast growth in the sales of computers, software and networking products is anticipated.
• 4) The new policies for promoting the growth of software products and the IC industries announced by the State Council are being implemented, and tax reductions for IC products will be introduced. These factors will certainly accelerate the development of China' s software and IC industries. The size of the software industry is expected to increase by more than 30%, while the IC industry is expected to increase by 40%.
• 5) Exports of electronics products are expected to increase steadily this year. In the electronics industry, there will be an increase in foreign investment in factories, joint ventures and cooperative enterprises.
• 6) Growth this year is expected to come mainly from CDMA mobile phones, HDTVs, computers, networking products, software, etc. These factors should provide new market opportunities for the electronics industry.
• 7) The restructuring of the telecommunications business is almost complete. Following these adjustments, the large telecom operators will act to improve their competitiveness on the market. They will also increase their investment in the basic infrastructure, providing new opportunities for communications products and the manufacturing industry.
• 8) After its accession into the WTO, China will regulate the market in line with WTO requirements. The market economy system will be regulated, which will further improve the environment for the development of the electronics industry.

As this report describes, China is rapidly closing the gap on technologies needed for electronics manufacturing. It can be expected that WTO membership combined with more aggressive incentives for foreign direct investment will lead to changes over the next five years that will be significantly greater than those of the past five years. The priorities described in this report will continue and will result in a more competitive business environment. We can summarize the present as follows.

As this report will show, China has access to most of the technologies needed to manufacture today' s products. Companies are already using leading edge manufacturing technologies for assembly that include chip-on-board, chip-on-glass, and chip-scale-packages. While the semiconductor industry lacks the capacity to meet domestic needs, China' s IC design capabilities are competitive in the global marketplace. The design of ASICs for advanced products, like MP3 players and set-top boxes, has been well established. Such ASICs can be manufactured by any number of firms in Taiwan, Singapore, or Japan.

Mainland China represents a huge opportunity for semiconductor manufacturers and equipment and materials suppliers. The emerging semiconductor market will exhibit growth far in excess of any other country in the 2003-2008 time frame. This 260-page report analyzes Mainland China' s semiconductor and equipment industries, examining the technical, economic, and political issues that are shaping this nascent industry.

Table of Contents

Chapter 1 - Introduction

• 1.1 Introduction

Chapter 2 - Semiconductor Industry

• 2.1 Introduction
• 2.2 China' s Domestic Semiconductor Market
• 2.3 China' s Semiconductor Infrastructure
• 2.4 Government Goals
• 2.5 Semiconductor Manufacturers In China
  • 2.5.1 China Hua Jing Electronics Group Corporation
  • 2.5.2 CSMC Technologies
  • 2.5.3 Grace Semiconductor Manufacturing
  • 2.5.4 Hangzhou Youwang Electronics
  • 2.5.5 Huayue Microelectronics
  • 2.5.6 Semiconductor Manufacturing Int' l (SMIC)
  • 2.5.7 Advanced Semiconductor Manufacturing (ASMC)
  • 2.5.8 Fairchild Semiconductor
  • 2.5.9 Huaxia Semiconductor Manufacturing
  • 2.5.10 Mitsubishi-Stone Semiconductor
  • 2.5.11 Shanghai Belling
  • 2.5.12 Hua Hong NEC Electronics
  • 2.5.13 STMicroelectronics - Hynix
  • 2.5.14 Toshiba Semiconductor (Wuxi)
  • 2.5.15 He Jian Technology
  • 2.5.16 TSMC
  • 2.5.17 Ningbo Sinomos Semiconductor Incorporated (NSSI)
  • 2.5.18 SIM-BCD
  • 2.5.19 Intel
• 2.6 Back-End Manufacturing
• 2.7 Printed Circuit Board (PCB) Manufacturing
• 2.8 Microelectronics Industry Equipment
• 2.9 IC Design
• 2.10 Electronics Components
• 2.11 Role Of Foreign Companies
• 2.12 IC Industry Assessment

Chapter 3 - Market Analysis

• 3.1 Economic Recovery In Asia
• 3.2 Semiconductor Market
• 3.3 Semiconductor Equipment Market
• 3.4 Telecommunications
  • 3.4.1 Wireless
  • 3.4.2 Internet
• 3.5 Computers

Chapter 4 - High-Tech Sectors

• 4.1 Introduction
• 4.2 Telecommunications
  • 4.2.1 China Telecom
  • 4.2.2 China Mobile
  • 4.2.3 Domestic Competition
  • 4.2.4 Foreign Competition
• 4.3 Computers 4-11 4.3.1 Domestic Suppliers
  • Lenovo
  • The China Great Wall Group
  • Tontru Information Industrial Group
  • Others
  • 4.3.2 Major Foreign Competitors
• 4.4 Optoelectronics
• 4.5 Software
• 4.6 Consumer Electronics
• 4.7 Chemicals
• 4.8 Environmental Industry
• 4.9 TFT-LCD Technology

Chapter 5 - High Technology Industry Development Zones

• 5.1 Introduction
• 5.2 Torch Program
• 5.3 High Technology Industry Development Zones
  • 5.3.1 Anhui Province
    • Hefei High And New Technology Industry Development Zone
  • 5.3.2 Beijing
    • Beijing Experimental Zone For The Development Of New Technology Industries
    • Changping Park Of Bez
    • Fengtai Park Of Bez
  • 5.3.3 Fujian Province
    • Fuzhou Science And Technology Park
    • Xiamen Torch High Technology Industry Development Zone
  • 5.3.4 Gansu Province
    • Lanzhou High And New Technology Industry Development Zone
  • 5.3.5 Guangdong Province
    • Foshan High And New Technology Industry Development Zone
    • Guangzhou Tianhe High And New Technology Industry Development Zone
    • Huizhou Zhongkai New Technology Industry Development Zone
    • Shenzhen Science And Technology Industrial Park
    • Zhongshan High & New Technology Innovation Service Center
    • Zhuhai High And New Technology Industry Development Zone
  • 5.3.6 Guangxi Zhuang Autonomous Region
    • Guilin High And New Technology Industry Development Zone
    • Nanning New Technology Industry Development Zone
  • 5.3.7 Guizhou Province
    • Guiyang Xintian New Technology Industry Development Zone
  • 5.3.8 Hainan Province
    • Hainan International Industrial Park
  • 5.3.9 Hebei Province
    • Baoding New Technology Industry Development Zone
    • Shijiazhuang High And New Technology Industry Development Zone
  • 5.3.10 Heilongjiang Province
    • Daqing High And New Technology Industry Development Zone
    • Harbin High And New Technology Industry Development Zone
  • 5.3.11 Henan Province
    • Luoyang High And New Technology Industry Development Zone
    • Zhengzhou High And New Technology Industry Development Zone
  • 5.3.12 Hubei Province
    • Wuhan Donghu New Technology Development Zone
    • Xiangfan High And New Technology Industry Development Zone
  • 5.3.13 Hunan Province
    • Changsha High And New Technology Industry Development Zone
    • Zhuzhou High And New Technology Industry Development Zone
  • 5.3.14 Inner Mongolia Autonomous Region
    • Baotou Rare Earth High And New Technology Industry Development Zone
  • 5.3.15 Jiangsu Province
    • Changzhou High And New Technology Industry Development Zone
    • Nanjing High And New Technology Industry Development Zone
    • Suzhou High And New Technology Industry Development Zone
    • Wuxi High And New Technology Industry Development Zone
  • 5.3.16 Jiangxi Province
    • Nanchang High And New Technology Industry Development Zone
  • 5.3.17 Jilin Province
    • Changchun High And New Technology Industry Development Zone
    • Jilin High And New Technology Industry Development Zone
  • 5.3.18 Liaoning Province
    • Anshan High And New Technology Industry Development Zone
    • Dalian High And New Technology Industrial Park
    • Shenyang New-High-Tech Industrial Development Zone
  • 5.3.19 Shaanxi Province
    • Baoji High And New Technology Industry Development Zone
    • Xi' an New Technology Industry Development Zone
  • 5.3.20 Shandong Province
    • Ji' nan High And New Technology Industry Development Zone
    • Qingdao High-Tech Industrial Park
    • Weifang High And New Technology Industry Development Zone
    • Zibo High And New Technology Industry Development Zone
  • 5.3.21 Shanghai
    • Incubator Center Of High-Technology Of China Textile International
    • Shanghai High And New Technology Industry Development Zone
    • Shanghai Zhangjiang Hi-Tech Park
  • 5.3.22 Shanxi Province
    • Taoyuan High And New Technology Industry Development Zone
  • 5.3.23 Sichuan Province
    • Chengdu High And New Technology Industry Development Zone
    • Chongqing High And New Technology Industry Development Zone
    • Mianyang High And New Technology Industry Development Zone
  • 5.3.24 Tianjin
    • Tianjin New Technology Industrial Park
  • 5.3.25 Xinjiang Uygur Autonomous Region
    • Urumqi High And New Technology Industry Development Zone
  • 5.3.26 Yunnan Province
    • Kunming High And New Technology Industry Development Zone
  • 5.3.27 Zhejiang Province
    • Hangzhou High And New Technology Industry Development Zone
• 5.4 Free Trade Zones

Chapter 6 - Economic Statistics And Analysis

• 6.1 Economic Climate
• 6.2 GDP
• 6.3 Employment Sector
• 6.4 Inflation
• 6.5 Retail Sales
• 6.6 Foreign Trade
• 6.7 Rural Spending
• 6.8 Investments
• 6.9 Economic Statistics
• 6.10 National Bureau Of Statistics (NBS)
  • 6.10.1 Functions And Responsibilities
  • 6.10.2 Leadership
  • 6.10.3 Internal Setup
  • 6.10.4 Overview

Chapter 7 - Domestic Private Sector Issues

• 7.1 Economic Transformation
• 7.2 Private Sector Dynamics
• 7.3 Shift Of Government Policy
• 7.4 Private Sector Financing
• 7.5 New Rules Under The WTO

Chapter 8 - Foreign Investment

• 8.1 Foreign Direct Investment
• 8.2 Turnaround
• 8.3 WTO Pledges
• 8.4 Can China Be Trusted
• 8.5 Venture Capitalists
• 8.6 Sino-Japanese Trade

Chapter 9 - Political Issues

• 9.1 China' s Foreign Policy
  • 9.1.1 National Sovereignty
  • 9.1.2 Opposing Superpowers
  • 9.1.3 Peaceful Coexistence
  • 9.1.4 Strengthening Solidarity
  • 9.1.5 Relations With Developed Countries
  • 9.1.6 Promoting China' s Reunification
• 9.2 One Country, Two Systems
• 9.3 China-Taiwan Relations

LIST OF FIGURES

• 3.1 China' s GDP -- 1980-2009
• 3.2 China' s IC Production -- 1995-2009
• 3.3 China' s IC Consumption -- 1995-2009
• 3.4 China' s IC Production/Consumption Ratio -- 1995-2009
• 3.5 China' s IC Import Requirements -- 1995-2009
• 3.6 China' s IC Supply/Demand -- 1995-2009
• 3.7 China' s IC Fab Capacity - 2000-2009
• 3.8 China' s IC Applications -- 2009
• 3.9 Semiconductor Equipment Forecast
• 3.10 Semiconductor Equipment Market Shares -- 2009
• 3.11 China' s Revenue of Telecom Services - 1999-2009
• 3.12 China' s Mobile and Fixed Line Subscribers - 2009
• 3.13 Cellular Subscribers In China And Asia
• 3.14 China' s Cellphone Market -- 1996-2009
• 3.15 China' s Internet Users -- 1996 - 2009
• 3.16 China' s PC Market -- 1992-2009
• 4.1 Materials Forecast By Region
• 5.1 Map Of Regions Of China
• 6.1 China' s GDP Growth
• 7.1 Percentage Of Private Sector Industrial Output
• 7.2 Employment Growth Rates By Type Of Employer
• 7.3 Sources Of Finance By Company Size
• 7.4 Banking Constraints By Company Size
• 8.1 Direct Foreign Investment -- 1985-2009
• 9.1 Taiwan' s Jobless Rate

LIST OF TABLES

• 2.1 Chinese IC Fab Construction 2004-2009
• 2.2 Chinese Foundry Construction 2004-2009
• 2.3 IC Technology Development In China
• 2.4 Major Packaging And Testing Companies In China
• 2.5 China IC Packaging And Testing Firms: Joint
• 2.6 China IC Packaging And Testing Firms: Wholly-Owned Taiwan Firms
• 2.7 China IC Packaging And Testing Firms: Locally-Owned Firms
• 2.8 China fabless IC design firms
• 2.9 Main Pure-Play Foundry Revenues In China 2007-2009
• 4.1 China' s Leading Export/Import Partners For High-Technology Products - 2008
• 4.2 Main Software Parks In China
• 4.3 China' s Consumer Electronics Production
• 5.1 National High Technology Industry Development Zones
• 6.1 Major Economic Indicators 2008-2013
• 8.1 Foreign Direct Investment In China By Enterprise
• 8.2 Top Ten Foreign Investors In China - 2009
• 8.3 Foreign Direct Investment By Destination
• 8.4 Direct U.S. Foreign Investment -- 1979-2008
• 8.5 Top Venture Capitalists - 2008

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