Market Research Report
Mainland China's Semiconductor and Equipment Markets: Analysis and Manufacturing Trends
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|Mainland China's Semiconductor and Equipment Markets: Analysis and Manufacturing Trends|
|Published: May 1, 2021||Content info:||
China has made some progress in developing its domestic fabless industry, though is still dependent on importing the final manufactured product in several cases. It has also reduced its import dependence in some areas by encouraging global producers to set up manufacturing within China to serve both its local demand as well as use China as an export base. Most noticeably in recent years has been the setting up of memory plants by Samsung, Hynix, and Intel in China that has resulted in a strong CAGR of memory exports from China. However, given the continued growth of domestic tech demand as well as Chinese brand's rising share of end tech products in the global market has meant that China's demand for semiconductors has outpaced the growth of its domestic semis production and has increased demand for semi parts that it does not locally produce, resulting in larger net import of semiconductors.
Seventy percent of all tech- related imports by China are of semiconductor products, thus, making it highly dependent on foreign-sourced parts. Several of these imported semiconductors are also meant for powering its technology related exports (handsets, telco equipment, and consumer electronics). China also imports most of its equipment required for semi and display manufacturing and currently has limited capability to manufacture any of these equipment companies locally. Thus, not surprisingly, the focus of Chinese authorities, in the past decade or more, has been to develop a local semiconductor industry.
China's rising investment in the semiconductor industry is growing TAM for local equipment makers. Based on the projects we track, we expect investments in new fabs or capacity expansion will exceed US$160bn in China over the coming 5-7 years; we expect this will drive an increase in China's equipment spending to more $40 billion in 2025, with sixty percent of the investments going to memory fabs. We believe the expansion of product offerings by local equipment companies will result in significant growth opportunities over the coming five years.
While the focus on developing a domestic semiconductor industry has borne some fruit - local semis production has been growing at a 20% CAGR in recent years (including semi production by global players out of their China-based facilities) - China, as discussed in the previous section, remains a large importer of semiconductors, and hence, the need to continue to focus on developing the local industry. Geopolitical developments in recent years, particularly the inclusion of several Chinese entities (notably Huawei, Hikvision amongst others) by the US on its restricted Entity List, further adds urgency to China's initiatives to localize the tech industry and reduce its import dependence.
This 300+-page report analyzes Mainland China's semiconductor and equipment industries, examining the technical, economic, and political issues that are shaping this nascent industry.