Analysis of the Development Pattern of China’s high-performance IC Industry

In recent years, China’s electronic information industry as a whole maintains a rapid growth with operating income in January to October in 2012 reaching 8.8208 trillion yuan, a year-over-year growth of 13.7%. Software industry continues to expand proportion, industrial structure further optimizes and the industry’s software trend becomes increasingly significant. As the basis, IC industry is the fundamental driving force supporting the entire electronics information industry.

From China’s IC scale growth in recent years, China’s growth rate declined down to 9.2% due to European debt crisis, weak U.S. economy, the Japanese earthquake, as well as the slowdown of growth of global IC industry. It is expected the sales of China’s IC in 2012 to reach 190.2 billion yuan, up by over 20% from last year. As for 2013, under the expectation of cyclical rebound for global semiconductor industry growth, China’s IC industry can maintain stable growth in scale, which is projected to see growth rate of 17.1% in 2013 with industry scale coming in at 222.7 billion yuan. Driven by the continued growth of China’s economy, the further development of strategic emerging industries, as well as the production expansion of Shanghai Huali Microelectronics, and Intel’s Dalian factory, China’s IC industry will remain rapid growth momentum.

On the industrial structure of IC side, the main body in China is still test packaging and chip manufacturing. IC design industry is the most active development area for future IC industry in China, a large batch of IC design enterprises actively plan for public financing. At present, China’s IC design industry mainly concentrates on Pearl River Delta, Shanghai and the surrounding areas. With Intel Dalian, Shanghai Huali Microelectronics and the under-development Samsung Semiconductor as well as other 12-inch chip production line establishing and putting into production, China’s chip manufacturing scale in the next three years will continue to rapidly expand.

IC design industry in 2012 maintaining stable growth is mainly driven by market demand for mobile Internet terminal. The rapid growth of worldwide smartphone, Tablet PC bolsters the market demand of related chip, and becomes the main driving force of industry growth. Promoted by smartphone, Tablet PC ad other mobile terminal product in 2013, smartphone application processor, mobile communication baseband chip, terminal multimedia chip as well as related IC product will become the main growth point of China’s IC design industry.

In terms of the entire industry layout, China’s IC industry shows the evolution trend of “industries cluster, move toward east and west”. Corporate regional investment tends to be dispersed; design industry gathers in the east, manufacturing transfers to west; Shanghai-as-the-center Yangtze River Delta and Beijing-as-the-center Beijing-Tianjin region shows more prominent advantageous position in IC design; chip manufacturing extends to regions with abundant capital. Dalian, Wuxi, Suzhou and other second-tier cities in coastal areas will be the focus of chip production line construction project; packaging and testing industry will continue to shift to low-cost regions. Wuhan, Hefei and other convenient-transportation central cities in central region will be the focus undertaking the transfer.

In recent years, with foreign investment projects having settled in the central and western regions, the regional center of China’s IC industry is experiencing significant shift, due to Chengdu, Xi’an and other Midwest cities has good basis in supporting facilities, technological talent, resources and energy; in addition, the land cost, labor cost, investment policy is more advantageous comparing with eastern coastal areas, so it is expected the investment of IC projects in Midwest cities to continue. The investment surge of IC industry in Midwest region leads to that the newly-built 12-inch, 8-inch production line as well as packaging and testing enterprise has settled in Midwest region. On the chip manufacturing side, the first phase investment of $7 billion in Samsung memory projects is located in Xi’an High-tech Zone, becoming the largest foreign investment project for China’s electronic information. TI has set up production base in Chengdu with the first phase investment at $275 million, second phase investment at $600 million, and the annual revenue is estimated to reach $1billion. From IC packaging and testing aspect, Intel invested $600 million in Chengdu to establish the largest chip and testing center. Micron Semiconductor’s module assembly and chip packaging projects settled in Xi’an with total investment reaching $250 million and annual export of $500 million.

It can be seen that China’s macroeconomic policies have an important impact on the high-speed development of the integrated circuit industry. In July 2012, China’s State Council issued the “Twelfth Five-Year” national strategic emerging industry development plan”, clearly pointing out new-generation information technology industry is the one of the four backbone and strategic emerging industries and posing high-performance IC roadmap in the electronic core infrastructure industries. The development goal of high-performance IC is: by 2015, high-performance IC design technology reaches 22nm, production technology to 12 inches and 28nm; to master advanced packaging and testing technology, initially form IC manufacturing equipment and materials supporting capacity; 2020 sees IC design, manufacturing, packaging testing technology come in at international advanced level.

Of course, China’s high-performance IC is still in the stage of chasing foreign advanced technology; from the entire industry chain of high-performance IC, upstream includes design and manufacturing links, downstream covers packaging and testing links, China is weak in design and manufacturing links, showing large gap with foreign giants. In addition, in the several emerging application areas of IC, Internet of Things, automotive electronics, medical electronics, smart grid develop rapidly in recent years, consumer electronics, communication equipment chip achieves large shipments, the mature computer as well as its peripheral IC application development is relatively slow, security industrial control applications is gradually becoming popular.

Furthermore, on engineering of high-performance IC side, some high-end general-purpose chip core technology needs breakthrough, mobile Internet, analog-to-digital hybrid, information security, digital TV, and radio frequency identification sensor chip design capability need to constantly upgrade, also deserve attention and support in all aspects. Some key equipment, device and material also require development capacity.

Overall, China’s IC market shows bright future, which is projected to grow at a strong compound annual growth rate of 13% from 2013 to 2017, faster than 8% growth rate of the worldwide IC market. And the revenue expects to reach over $100 billion for the first time in 2014 and almost $150 billion in 2017.