Yu Xiekang: Collaborative innovation has become the top priority for industrial development

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At present, the global integrated circuit industry has entered a period of major adjustment and change. Judging from the trend of the evolution of the world's integrated circuit industry, the market is concentrating on my country, and the future of the industry will also be concentrated on my country, which provides a golden opportunity for my country's integrated circuit industry to catch up. Accelerating the development of the integrated circuit industry has important technical and industrial support for accelerating my country's industrial transformation and upgrading and "Internet +" reform, and achieving the strategic goal of "Made in China 2025". In particular, the release of the "National Integrated Circuit Industry Development Promotion Outline" has set ambitious goals for the development of my country's integrated circuit industry. The gradual introduction of policy details and the gradual improvement of the industrial development environment will further promote the development of my country's integrated circuit industry, but we must face up to the current problems in the development of my country's integrated circuit industry. Improving the ability of industry collaborative innovation will become the top priority for the development of my country's integrated circuit industry in the "13th Five-Year Plan".

my country's integrated circuit industry has a huge market space and has become the main market for global semiconductors.

As a strategic, basic and leading industry for national economic and social development, the integrated circuit industry has strong innovation and integration capabilities, and has penetrated into all aspects of people's lives, production and national defense security. From 2000 to 2014, the global semiconductor market size increased from US$204.394 billion to US$333.151 billion. The average annual growth rate was only 3.6%. At the same time, the average annual growth rate of the semiconductor market in the Asia-Pacific region (excluding Japan) reached 10%, and the scale rapidly expanded from US$51.265 billion in 2000 to US$194.226 billion in 2014. Correspondingly, the Asia-Pacific region with China as the core has rapidly increased its share in the global semiconductor market, and its market share has also increased significantly from 25.1% in 2000 to 58.3% in 2014. With the rapid growth of the domestic integrated circuit market, its global status is also rapidly improving. In 2014, the domestic IC market size accounted for 87% of the Asia-Pacific semiconductor market and 50.7% of the global semiconductor market. China has become the main market for global semiconductors.

With the transformation of my country's economic development model, the accelerated adjustment of industrial structure, the interaction and deep integration of industrialization and informatization, and the vigorous promotion of information consumption, the demand for integrated circuits will increase significantly, and the market size is expected to reach 1.2 trillion yuan by 2015.

Integrated circuits have surpassed crude oil to become China's largest imported commodity for several consecutive years, resulting in a huge import and export deficit.

The huge market demand is mainly met by imports. The value of integrated circuits in China's total electronic information product imports has increased from 5.9% in 2000 to 16.5% in 2014, making integrated circuits the largest import commodity in China for several consecutive years, surpassing crude oil. In 2013, the import value of integrated circuits reached 231.3 billion US dollars, while the import value of crude oil was 219.6 billion US dollars. Between 2008 and 2014, my country's import value of integrated circuits fell slightly in 2009 and 2014, and increased in the rest of the years.

According to statistics from the General Administration of Customs, China imported 285.66 billion integrated circuit products in 2014, a year-on-year increase of 7.3%; exported 153.52 billion integrated circuit products, a year-on-year increase of 7.6%, and the import deficit reached 132.14 billion pieces, a year-on-year increase of 9.3%.

In 2014, China imported integrated circuit products worth US$217.6 billion, down 5.9% year-on-year, and exported integrated circuit products worth US$60.9 billion, down 30.6% year-on-year, but the net import deficit was US$156.7 billion, up 9.0% year-on-year. Taiwan, South Korea and Malaysia are the top three sources of integrated circuit imports in mainland my country. In terms of exports, Hong Kong, Taiwan and Singapore are the top three markets for integrated circuit export in mainland my country.

As a mature industry, the average annual growth rate of my country's integrated circuit industry is much higher than that of traditional industries and even global peers, and it has become one of the fastest growing regions in the global semiconductor industry.

As the world economy recovers, the world semiconductor industry is very active in 2014, driven by the rapid development of traditional product markets such as consumer electronics, communications, and computers, as well as emerging markets such as smart phones, tablets, smart TVs, wearable devices, and the Internet, Internet of Things, cloud computing, and big data. It has achieved good results and is the best year since 2011. According to statistics from the China Semiconductor Industry Association, the world semiconductor industry's revenue in 2014 was US$333.15 billion, a year-on-year increase of 9.0%; the revenue in 2015 is expected to be US$344.54 billion, a year-on-year increase of 3.4%.

The sales revenue of my country's integrated circuit industry increased from 19.9 billion yuan in 2001 to 301.5 billion yuan in 2014, accounting for about 18% of the global integrated circuit market, with a compound annual growth rate of 23.2%, far higher than the world average of 6.66%. The integrated circuit design industry, wafer manufacturing industry, and packaging and testing industry have all formed a certain economic scale, and have formed three industrial clusters in the Beijing-Tianjin Bohai Bay Rim, the Yangtze River Delta, and the Pearl River Delta. The integrated circuit industry in cities such as Xi'an, Chengdu, Chongqing, Wuhan, and Hefei in the central and western regions has also developed rapidly. As a mature industry, the average annual growth rate of my country's integrated circuit industry is much higher than that of traditional industries and even global peers, and has become one of the fastest growing regions in the global semiconductor industry.

With the transformation of my country's economic development mode, the accelerated adjustment of industrial structure, and the interaction and deep integration of industrialization and informatization, the vigorous promotion of information consumption will greatly boost the demand for upstream integrated circuits. At the same time, my country has continuously increased its policy support for the integrated circuit industry from the national information security strategy level, and with the accumulation of domestic integrated circuit technology, the scale of my country's integrated circuit industry will continue to grow during the "13th Five-Year Plan", and the annual compound growth rate will remain above 20%.

After decades of development, my country's integrated circuit industry has a certain development foundation and potential, but there are also many problems that must be paid attention to.

The gap between domestic and international enterprises is widening due to many internal and external factors, such as the relatively lagging development of my country's integrated circuit industry, the lack of matching investment intensity, the prominent financing bottleneck of integrated circuit enterprises, the poor self-sustaining function of backbone enterprises in the industry, and the insufficient accumulation of innovation factors. In addition, international giants are gathering in China, and China has become the most competitive place. All multinational companies have set up branches and factories in China, and this trend continues. Among the top 20 semiconductor manufacturers in the world, most of them, including Intel, Samsung Semiconductor, Hynix, Micron, TI, etc., have invested a lot of money in China to build production bases and R&D centers.

The ability of technological innovation is not strong. Compared with the international advanced level, my country's integrated circuit industry has a significant gap. Constrained by the export restrictions on integrated circuit technology by Western countries, my country's integrated circuit chip manufacturing technology has always lagged behind the international advanced level by 2 technical nodes. my country's 12-inch wafer manufacturing lines were all established after 2000. The development capabilities of process modules, IP cores, customer service capabilities, and overall service levels need to be further improved. The lag in processing capabilities and technology has a greater impact on the integrated circuit industry. Even as a relatively mature and advantageous industry, the share of high-end packaging products of domestic packaging and testing companies is currently very low. The sales of high-end packaging technologies such as CSP, WLP, and TSV of the top three domestic packaging and testing companies only account for 20% of the company's total sales. The industrialization supporting equipment and material companies basically remain on low-end products, and high-end and key packaging and testing equipment and materials are still basically dependent on imports.

The scale of enterprises is not large. Whether it is the chip manufacturing industry or the packaging and testing industry in my country's integrated circuit industry, the scale of enterprises is not large, highlighting the relative weakness of national capital. Take SMIC as an example. Its sales revenue in 2014 was less than 1/10 of TSMC, and its revenue gap with the world's third largest wafer foundry company GlobalFoundries is also widening. In the packaging and testing industry, the combined sales revenue of the top three domestic packaging and testing companies in China, Changdian Technology (excluding the acquisition of overseas shares), Tongfu Microelectronics, and Tianshui Huatian, is less than half of that of ASE Group.

Insufficient industrial chain coordination. At present, the domestic whole machine system development, chip design, chip manufacturing and other industrial chain links are still in a disconnected state. The vast majority of whole machine enterprises remain in the processing and assembly stage and lack the ability to design whole machine systems. Most domestic chip design enterprises lack the ability to develop product solutions. Domestic whole machine enterprises basically purchase foreign system solutions. The lack of advanced processing and manufacturing technology, production capacity scale, number of IPs, and service quality has led to the loose integration of high-end chip design and manufacturing processes. Chip foundry companies are unable to undertake domestic advanced chip production capacity. More than half of the local chip manufacturing demand is undertaken by overseas companies such as TSMC and UMC. As of the end of 2014, my country's integrated circuit wafer manufacturing industry had a 12-inch production capacity of about 470,000 pieces/month, and foreign companies and foreign capital accounted for about 75% of the share. If the sales of the entire wafer manufacturing industry in 2014 are calculated, foreign companies and foreign companies will account for more than 60%. At the same time, the 12-inch production lines of local enterprises are also 2-2.5 technology generations behind in technology. The insufficient production capacity and backward technology of local enterprises have brought great hidden dangers to the coordinated development of the integrated circuit industry in the future.

It is difficult for the industry to form a joint force. Institutional defects have caused domestic enterprises to lag behind. Some domestic enterprises are reluctant to give up power. Under the influence of the traditional idea of ​​"preferring to be the head of a chicken rather than the tail of a phoenix", these enterprises have formed a strong "power complex". They would rather "break their heads and bleed" on several homogeneous products. It is rare to see enterprises integrate resources by "retreating first and advancing later" and jointly reorganize with the bond of capital to achieve the goal of becoming stronger and bigger.

The reality of "two being outside" is grim. The huge and increasing deficit in integrated circuit imports and exports reflects the relatively prominent shortcomings of my country's integrated circuit manufacturing industry, and also shows the essence of the large gap with the international advanced level. It is ultimately manifested in the grim reality of "two being outside" in the integrated circuit industry. On the one hand, the products of integrated circuit design companies are mainly processed overseas or by foreign-funded enterprises; on the other hand, the main business of integrated circuit manufacturing companies is also overseas.

At the same time, we must also face the fact that my country's integrated circuit industry still has problems such as a relative shortage of high-end talent, an industrial environment that needs to be improved, difficulties in corporate financing, and high financing costs.

Improving the industry's collaborative innovation capabilities will become a top priority for the development of my country's integrated circuit industry during the 13th Five-Year Plan period.

During the 13th Five-Year Plan period, my country's integrated circuit industry must give full play to my country's advantages as the world's largest and fastest-growing market, strengthen collaborative innovation in the industrial chain, break the "patent encirclement and suppression" of international giants, strengthen the linkage of the entire industrial chain of integrated circuit design, manufacturing, packaging and testing, equipment and materials, and coordinate the collaborative development of the entire ecological chain including technology, industry, application and security.

Increase integration efforts, concentrate innovation resources, and enhance corporate competitiveness. As the global semiconductor industry enters a mature stage, mergers and acquisitions between enterprises have become a general trend. According to the current development status of my country's integrated circuit industry, actively implementing corporate mergers and reorganizations can solve the problems of unreasonable structure, low concentration, small and scattered enterprises, and homogeneous competition in my country's integrated circuit industry. Through mergers and reorganizations, resources can be focused on key advantageous enterprises, thereby creating an integrated circuit carrier enterprise with international competitiveness, which can drive the entire industry to become bigger and stronger. For example, the acquisition of Star Semiconductor by Changdian Technology will enable Changdian Technology to enter the ranks of global packaging leaders. Huatian Technology successfully acquired 63.85% of the shares of Kunshan Xitai Microelectronics Technology Co., Ltd. Through the equity acquisition, the company not only mastered advanced packaging technology, but also rapidly increased advanced packaging capacity through the integration and allocation of relevant resources. Changdian Technology, together with Xinchao Group and Xinzhilian Investment, jointly invested in Xinzhilian, which is engaged in the research and development of new integrated circuit advanced packaging and testing technologies; research and development, production and sales of integrated circuit advanced packaging and testing materials. Some state-owned integrated circuit companies established earlier have been in long-term losses due to various factors, or have been barely able to survive by relying on state funds. If they are acquired by large and powerful companies with the participation of national industrial funds, the companies may be able to regain new life.

The industrial chain is linked to accelerate the pace of vertical integration of design, manufacturing, and packaging and testing. my country's integrated circuit industry should form an industrial chain coordinated development pattern driven by applications, that is, the system drives the whole machine, and the whole machine drives the device. The linkage between domestic chip, design companies and terminal manufacturers can greatly reduce the R&D cost and cycle, and drive the significant enhancement of their industrial chain technology innovation capabilities. For example, Huawei's high-end smart phone chips choose HiSilicon to strengthen vertical integration and improve product performance and profit margins. TCL combines market demand with chip and whole machine design, and makes its own bridge to perfectly connect with all parties to achieve product differentiation design and enhance competitiveness. Huatian Technology and Wuhan Xinxin signed a strategic cooperation agreement. The two parties will cooperate in advanced manufacturing, packaging and testing of integrated circuits and jointly build China's integrated circuit industry chain. Huatian Technology also raised 2 billion yuan in a private placement to increase advanced packaging, and carried out three major projects to expand the scale of high-density packaging, industrialize smart mobile terminal packaging, and develop and industrialize wafer-level packaging technology. Tongfang Guoxin acquired Xi'an Huaxin Semiconductor, Changdian Technology cooperated with SMIC, and Tongfu Microelectronics cooperated with Huali Electronics. Cooperation may solve the shortcomings of wafer partners. All of this, with the support of governments at all levels, highlights enterprises as the main body of industrial development and insists on completing resource allocation through market-oriented means. It is of great strategic significance for adjusting the structure of the integrated circuit industry and vigorously developing the integrated circuit manufacturing industry.

Build a collaborative innovation platform for industry, academia, research and application to promote the transformation of scientific and technological achievements. Encourage key backbone enterprises to build industry-university-research cooperation innovation entities based on innovation platforms and resource advantages such as enterprise technology centers, academician workstations, and engineering research centers, promote qualified enterprises to jointly establish public service platforms with universities and research institutes, build innovation platforms that serve enterprises, especially small and medium-sized enterprises, give play to resource advantages, and give full play to the leading and driving role in industry-university-research cooperation. Accelerate the construction of a long-term cooperation mechanism of "joint investment, joint development, mutual trust, complementary advantages, shared benefits, and shared risks", promote the establishment of industry alliances, industry technology research institutes and other industry-university-research cooperation models, integrate industrial technology innovation resources, carry out collaborative innovation, break through the key major technologies that restrict the development of my country's industry, and solve the bottleneck of industrial development from the source. SMIC cooperated with Wuhan Xinxin, Tsinghua University, Peking University, Fudan University, and the Institute of Microelectronics of the Chinese Academy of Sciences to establish the "Integrated Circuit Leading Technology Research Institute" to jointly build the most advanced integrated circuit process technology research and development institution in China. If the "Integrated Circuit Leading Technology Research Institute" can be committed to integrating the research and development resources of the domestic IC industry chain, it will create a public platform that can link equipment manufacturers, material suppliers, foundries, design companies and scientific research institutions. This is not only a technology innovation platform that combines production, education, research and application, but also a verification platform that provides large-scale production conditions for the research and development of domestic special equipment and materials.

Source: China Electronics News, Electronic Information Industry Network

Author: Chen Bingxin

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