The past, present and future of IC design companies

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The past, present and future of IC design companies [Copy link]

：How did China's IC design industry get through the "seven-year itch"? (Reprinted)

Author: Nuclear Fusion Submission Date: 2006-5-9 21:36:00

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　　"Seven-year itch" is a foreign word, which means that many things will have some problems in the seventh year regardless of human will, such as love and work. In 2006, China's IC design industry also encountered the "seven-year itch".
　　
　　
　　In 2000, the State Council issued the "No. 18" document, which was a milestone for China's IC design industry. That year can be regarded as the first year of rapid development of China's IC design industry. 2006 is exactly the seventh year after the release of the No. 18 document. In this year, China's IC design industry is facing many problems and is shrouded in layers of dark clouds...
　　
　　The Han￥Xin incident has greatly reduced the image of Chinese IC companies, especially the returnees' IC companies; the Han￥Xin incident has also caused people to doubt whether Chinese IC companies can design high-end processors such as DSP and CPU. In fact, many "X-cores" and "X-numbers" that often appeared in people's sight a few years ago have become numerous. At present, only "Loong￥X" is still struggling, and it is also facing rumors of property rights disputes with MIPS. In addition, in the bright and sunny March, Zhuhai Actions, the flagship of China's IC design industry, received a preliminary ruling notice of patent infringement from the US ITC, and its rival SigmaTel said it would charge a 4% patent fee for all MP3s that did not use its chips. These patent sticks have forced the industry to worry about Actions' performance in 2006 and who will be hit by the next patent stick. Finally, local veteran semiconductor manufacturers such as Silan Microelectronics, A-Wang Electronics and Sigma Jinghua Microelectronics are facing vicious competition from many new peers that emerged after 2000, and their lives are becoming increasingly difficult.
　　
　　From the perspective of the total number of IC design companies, 2006 will also encounter a hurdle, and more companies will go bankrupt or be merged. According to data from the China Semiconductor Industry Association, by the end of 2005, the total number of Chinese IC design companies was about 479, a slight increase compared to 2004. The trend of rapid increase in the total number of IC design companies since the release of Document No. 18 has quietly stopped. According to the fifth annual survey conducted by this magazine recently, some IC companies have been eliminated due to inaccurate positioning or poor management. For example, about 10 IC companies closed down in Beijing last year, 6 IC companies closed down in Shenzhen, and Hongrui Microelectronics, SiChuang Electronics, Minqin Electronics and some small design service companies closed down in Shanghai.
　　
　　In addition to the closed companies, the Chinese market saw the first foreign acquisition of a Chinese IC company last year, when France's Thomson Silicon Components (TSC) acquired Beijing SMIC United, which mainly develops H.264/MPEG4 multi-mode codec chips. Bian Xiaochun, former general manager of SMIC United, said: "The reason for the acquisition is that our technology is advanced and TSC also needs to build a design team in China, and we provide a ready-made team." He analyzed: "In Silicon Valley, there are two ways to measure the success of a company, one is to go public and the other is to be acquired. Being acquired means you are valuable. There are many technology companies in Silicon Valley that hope to be acquired by large companies from the day they are established. They are "raising piglets" in order to sell them. This is the culture of Silicon Valley. If there are really Chinese "piglets" that are sold at a good price, the market will become active and more resources (funds, talents) will be attracted."
　　
　　SMIC United has taken the lead. It is expected that more acquisitions and mergers will occur in 2006, including acquisitions of China by overseas capital and cooperation between local IC companies. Those companies that have entered the "seven-year itch" will have some wonderful stories. Therefore, the total number of Chinese IC design companies in 2006 may decline. According to statistics from the Semiconductor Industry Association, the total number of IC design companies in 2005 increased by only three from 2004. We believe that the current number of 479 should have reached a peak, and the total number of IC design companies will show a downward trend in 2006. Table 1 shows the changes in the total number of Chinese IC design companies in the past five years and the forecast for 2006.
　　
　　Although it has encountered the "seven-year itch", in recent surveys and interviews on China's IC design industry, we have seen that the Chinese IC design industry group is making self-adjustments. After experiencing the "Han￥Xin incident", China's IC design industry is reflecting and moving towards a more pragmatic direction. "After a series of lessons, China's IC design industry as a whole is becoming more pragmatic. They have shifted from impacting high-tech and high-tech products to seeking breakthroughs at the application level and at the product level." Zhou Shengming, from the Shenzhen Integrated Circuit Design Industry Base Management Center, said.

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In fact, we have seen many pragmatic IC companies in this interview, and we are proud of their achievements. For example, Shengbang Microelectronics, Shuangjing Technology, Siwang Microelectronics, Maxim, Ted Semiconductor, Changyuntong and other companies that have been quietly working in the power IC market, their products have long gone from low-end substitution to high-end substitution, and the performance of some products has exceeded that of international brands, so their products have been widely accepted by the market, including top communication equipment manufacturers that are difficult to enter. "General circuits such as 74, 755, 325, 339 and 324 have a history of several decades, with very thin profits, and are commonly seen in the SEG electronics market, but it is very strange that all large semiconductor manufacturers, including the top 10 giants, have not given up this market. The secret is that, first, the sales volume is stable, which can maintain the operation of an organization; second, by selling these products, the company's name is constantly repeated in the market, and the brand is also established. Shuangjing Technology hopes to become a household name in the SEG electronics market." Qu Xiangsheng, general manager of Beijing Shuangjing Technology, explained. In addition to maintaining the stable operation of an organization through the income of low-end substitution, these companies have also shown their strength in the high-end market. For example, the PLL products of Shenzhen Meixin have reached very high performance indicators. Yuan Yuan, general manager of the company, said: "Our latest low-frequency phase-locked loop product MCD2926, when the center frequency is 26.9950MHz, the measured FM deviation is only 22Hz, which is already the world's advanced level." We also see that companies such as Keda Electronics, Aike Microelectronics, and Jiantuo have not taken the high-end CPU route and have not applied for any national key research projects, but they are doing very well in the embedded CPU market. They can provide all the application software and technical support that customers need, and win orders and markets with a price-performance ratio that customers have to accept. For example, Keda Electronics has developed a SIP solution for the tax control machine market based on its 64-bit RISC CPU. It not only greatly reduces the number of components and makes the price only 1/3 of the popular solutions on the market, but also integrates the application software unique to the tax control machine. "For the most critical application software for the tax control machine, we have invited experts from the State Administration of Taxation to write it, and users only need to pay 10 yuan/set of copyright fees to obtain it." said Dr. Dong Tao, general manager of the company. This is the solution with Chinese characteristics, and it is also the path that Chinese embedded CPU manufacturers must take. Other articles in this special topic will tell the stories of these pragmatic companies. In fact, looking back at the six years since Document No. 18, except for a few companies that have been getting money from the state by continuously setting up projects and not doing practical things, more Chinese IC design companies are doing things in a down-to-earth manner. This can be seen from the overall sales revenue of China's IC design industry. In our 2001 survey, there were only 5 companies with sales revenue exceeding RMB 100 million, and only 20 companies with sales revenue exceeding RMB 1,000. In 2002, the total sales revenue of the top 10 companies was only RMB 680 million. However, since 2003 (because it takes at least 2 years from IC development to product maturity and then to mass production), the sales revenue of the top 10 IC design companies has exceeded RMB 1.7 billion, with a year-on-year growth rate of 157%; in 2005, the sales revenue of the top 10 IC design companies exceeded RMB 5 billion. The revenue of China's IC design industry has been growing at a very healthy growth rate year by year. Table 2 shows the trend of the total sales revenue of the top 10 IC design companies in the past five years.

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Through five consecutive years of investigation, we also found that the overall design level, business model and industrial chain environment of Chinese IC design companies are advancing step by step, which has created conditions for them to successfully pass the seventh year. In terms of process level design, as shown in Table 3, in 2001, the proportion of companies with design line widths below 0.25μm (including 0.25, 0.18 and 0.13μm) was only 20%, while in 2005 the proportion had risen to 71%; and the proportion of companies with design line widths below 0.18μm (including 0.18 and 0.13μm) also rose from 35% in 2002 to 58.9% in 2005. Many companies have generally adopted 0.13μm process in new product designs. As for the 90-nanometer process technology, they said that it was not because of insufficient design capabilities that they did not adopt it, but that the current manufacturing cost of 90 nanometers is still high, so the use of 0.13μm has a better cost-effectiveness. In terms of product design scale, they are also gradually increasing the complexity of their products. As shown in Table 4, only 15% of companies were able to design ASICs with more than 1 million gates in 2001, but this figure rose to 43% in 2005. This means that nearly half of the companies are able to design ASIC products with more than 1 million gates, and many of them are designing complex products with more than 5 million gates. According to the data from 2005, 13% of companies are designing ASIC products with more than 5 million gates. More importantly, our five-year survey has found that the business methods of Chinese IC design companies are becoming more diversified, and their business skills are becoming more sophisticated. Many companies are beginning to use distribution channels to promote products and expand markets, even overseas markets. The survey shows that 82.7% of companies are now using distribution to sell. Although most companies still retain the direct sales model, they are increasingly impressed by the value-added services brought by distribution. For example, more than 90% of the products of Zhuhai Actions and Beijing Siwang are currently sold through distribution channels. Gu Daoxiong, general manager of Shenzhen Changyuntong, said: "In the short term, we can find customers and entry points directly. But after entering the market, we must find agents to increase sales. This is what we must do in the medium and long term plan." At present, the company has 3 distributors in Shenzhen and 1 distributor in South Korea, and they are still looking for more distributors. Other companies such as Shenzhen Tianli Semiconductor, Shanghai Apexon Microelectronics, Shengbang Microelectronics, Shenzhen Xinwei Technology, and Vimicro are entering the international market with the help of international distributors. However, looking back at our survey in 2001, only 20% of companies said they would try to use distribution channels. Table 5 shows the trend of changes in the sales methods of IC design companies from 2001 to 2005. It should be noted that not only are more and more Chinese IC design companies cooperating with distributors, but the proportion of their sales through distribution channels is also increasing year by year. In the cooperation with local IC companies, local distributors are very active. For example, Shenzhen Beigaozhi has represented many domestic IC product lines. In summary, the steady development of China's IC design industry is inseparable from the achievements of the construction of the industrial chain since Document No. 18, which can also be reflected in our survey data over the past five years. In the 2001 survey, only 37% of companies said that their main foundry partners were in the mainland, but now nearly 70% of companies said that their main foundry partners are in the mainland, and their packaging and testing partners are also in the mainland, without the need to transfer abroad. Table 6 shows the changes in the selection of main foundry partners by Chinese IC design companies in the past five years. In addition, the steady development of China's IC design industry is also inseparable from the role of the seven major IC industrialization bases, especially the three major IC industrial bases in Beijing, Shanghai and Shenzhen. This issue has a special article to explore how they have realized their dreams in the seventh year after the establishment of the bases. 　　

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In addition, we see that the composition of Chinese IC design companies is also stabilizing. As shown in Table 7, the proportion of IC companies with less than 100 employees is basically maintained at about 60%. This means that while some companies are closing down, new companies are constantly being established, and the newly established companies are mainly composed of returnees. During the interview, we also found that through the lessons learned from some patent incidents, many Chinese IC design companies have protected themselves by applying for patents, and have achieved results. This is a sign that China's IC design industry has truly grown up. As Yang Jie, director of Apexon Microelectronics (Shanghai) Co., Ltd. said: "For a long time in the past, many Chinese IC design companies, due to limitations in R&D levels and other aspects, have made more follow-up and replacement products, so there are few independent patent applications. Now, many companies have begun to realize the importance of intellectual property rights and have begun to protect their own property rights. Apexon, as a company with an international positioning and technological innovation as the foundation of corporate development, has invested hundreds of thousands of dollars in intellectual property rights every year in recent years to apply for and protect intellectual property rights, achieving the expected goals and building its own patent barriers." Zhuhai Actions also said that the number of patents that have been approved has reached more than 15, and there are more than 30 patents under approval. Although the intellectual property status of most companies is still conservative due to funding and other reasons, these pioneering companies will give encouragement and confidence to other companies. In fact, intellectual property protection itself is a double-edged sword. Inadequate intellectual property protection will be harmful to domestic IC design companies in the long run. "This makes it impossible for us to compete with foreign companies. This overall impression of domestic companies has also implicated some companies that follow intellectual property protection and have not received the treatment they deserve. Intellectual property protection is an issue that must be addressed. Fortunately, it is not as difficult to solve in the IC industry as in the software industry." An interviewee from an IC design company who did not want to be named said. The Han￥Xin incident is promoting the government and the entire industry to take intellectual property issues more seriously. Although the image of Chinese IC companies will be affected in the short term, in the long run, the Han￥Xin incident has sounded a wake-up call for the industry, which is also a good thing. Another event of great significance to the Chinese IC design industry is that in the seventh year after the release of Document No. 18, an aircraft carrier of the Chinese IC industry began to set sail. It is HiSilicon Semiconductor, which was independent from Huawei Technologies. Its scale, technology, and investment have appeared as a leader from the beginning. In the interview, the company said that by the end of 2006, the company will have 1,500 employees and will sell its products worldwide, covering 3G mobile phones, video phones, digital image monitoring, set-top boxes, PMPs, IPTV, as well as network and national security ICs. Standing on the shoulders of giants, this aircraft carrier will surely bring new impetus to China's IC design industry and inject a dose of adrenaline into the Chinese IC industry, which is facing the "seven-year itch". Seven years is a hurdle, and once it is overcome, there will be a bright future.