China Chip Events 2019: Representative Enterprises Emerge

Latest update time：2020-01-05

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Source: Content from China Business News ",Thanks.

"We all feel that integrated circuits have indeed ushered in a new spring of development. " On December 28, 2019, the 20th Anniversary Innovation Achievements and Prospects Report Conference of the "Starlight China Chip Project" was held at the National People's Congress. Qu Weizhi, director of the National Informatization Expert Advisory Committee, former vice minister of the Ministry of Information Industry, and former executive deputy director of the Office of the State Council Informatization Leading Group, told participants including a reporter from China Business News.

Qu Weizhi revealed that from January to November 2019, China's integrated circuit imports amounted to US$277.86 billion, a year-on-year decrease of 4.5%; China's integrated circuit exports amounted to US$91.96 billion, a year-on-year increase of 18.7%. "I think the numbers are the most telling, " said Qu Weizhi.

China's integrated circuit import volume and import value are both declining. According to a research report compiled by the Prospective Industry Research Institute, from January to November 2019, China's import volume of diodes and similar semiconductor devices decreased by 5.4% to 19.9% in September and November, respectively, with a year-on-year increase of 8.5% and 3.1%; the import value decreased by 0.7% to 20.8% in September, with a year-on-year increase of 22.7%.

Data compiled by the China Business Industry Research Institute show that from January to October 2019, China's exports of diodes and similar semiconductor devices fell 9% year-on-year, but the export value increased 22.8% year-on-year.

Representative enterprises come to the fore

It was only in the past two years that people realized that the industry with the largest trade deficit in my country is not oil and gas, but integrated circuits.

According to the analysis of public data, my country's trade deficit in integrated circuits was US$127.74 billion, US$137.63 billion, US$138.63 billion, US$143.64 billion, US$156.76 billion, US$160.68 billion, US$166.16 billion, US$193.6 billion and US$227.42 billion from 2010 to 2018, respectively.

In other words, China's integrated circuit trade deficit has been expanding in recent years. The biggest change in 2019 is that exports are expected to exceed US$100 billion for the first time, and the trade deficit is expected to fall back below US$200 billion.

An expert from the China Semiconductor Industry Association told reporters that in fact, the biggest change in China's integrated circuit industry in 2019 was mainly reflected in exports. Since March 2019, exports have maintained rapid growth, especially in recent months, with monthly exports exceeding US$9 billion. The annual export volume is expected to exceed US$100 billion for the first time, becoming a global emerging export base. In comparison, China's semiconductor exports in 2017 and 2018 were US$66.9 billion and US$84.6 billion, respectively.

The rapid growth of export volume mainly depends on the continuous strengthening of the domestic semiconductor manufacturing industry. The above-mentioned expert told reporters that the country has gradually formed four major semiconductor manufacturing enterprise groups, including SMIC, Huahong Group, Tsinghua Unigroup, and China Resources Microelectronics.

According to a research report by TrendForce's Toppu Industry Research Institute, in the Q3 2019 global wafer foundry ranking by revenue, SMIC and Huahong Group ranked fifth and seventh in the world respectively. However, the global market share of the two companies is still below 6%.

It is worth mentioning that after Wingtech Technology acquired Nexperia Semiconductor, it has obtained the corresponding wafer production capacity of Nexperia Semiconductor and has also become an important domestic semiconductor foundry company.

From the perspective of the capital market, we can also clearly see the positive changes that have taken place in my country's semiconductor industry in 2019.

The reporter found out that on September 23, 2019, Goodix Technology, which provides biometric solutions such as fingerprint recognition for smartphones and other consumer electronics products, had a market value of over 100 billion yuan, becoming the first semiconductor company in the A-share market with a market value of over 100 billion yuan; On November 6, 2019, Will Semiconductor, which independently develops and sells semiconductor devices, became the second semiconductor company with a market value of over 100 billion yuan; On November 27, 2019, Wingtech Technology, whose main business is smartphone ODM (Original Design Manufacture) business and which added wafer foundry business through the acquisition of Nexperia, became the third semiconductor company in the A-share market with a market value of over 100 billion yuan.

However, in the field of IC design, Chinese companies as a whole still have a large gap with the world's top companies. According to the list of "Top 10 Global Chip Design Companies in 2018" released by the famous market research organization DIGITIMES Research, among Chinese companies, only MediaTek ranked fourth and Huawei HiSilicon ranked fifth.

There is a gap but also hope

When discussing the development of China's semiconductor industry, many industry insiders mentioned "Document No. 18" issued in 2000, which is the "Several Policies to Encourage the Development of Software Industry and Integrated Circuit Industry" issued by the State Council in June 2000. The core policies in it are summarized by the industry as the "two exemptions and three reductions" income tax preferences, as well as increasing the subsidy coverage of the policy.

After the State Council’s “Document No. 18” in 2000, the State Council issued “Several Policies to Further Encourage the Development of the Software Industry and the Integrated Circuit Industry” (commonly known as “New Document No. 18”) in 2011. “New Document No. 18” proposed 31 specific policy measures in terms of finance and taxation, investment and financing, R&D, and exports, further increasing efforts to support the development of the software and integrated circuit industries.

In addition, the establishment of the National Electronic Development Fund around 2000 and the National Integrated Circuit Industry Investment Fund (commonly known as the national "Big Fund") in 2015, as well as the current semiconductor investment landscape in which the national "Big Fund", local government funds and social capital are actively participating, are also considered important reasons.

Liu Yue, founding partner of Puhua Capital, pointed out that it was precisely because of the emergence of Document No. 18 in 2000, when China's semiconductor industry was in a state of chaos, that SMIC was founded in April 2000 and Spreadtrum Communications was established in April 2001. In fact, the first investment of the National Electronic Development Fund, Vimicro, which was established in 1999 with an investment of 10 million yuan, was also born in this context.

Zhang Huanlin, managing partner of SMIC, said, "In 2000, the Chinese semiconductor market was only worth $1 billion, but now it has reached $300 billion. In 2000, the Chinese market was very small, there were very few chip companies, and there was not much room for growth. But now China has become the world's largest electronic equipment market. China's semiconductor industry has no shortage of market or capital, and talent is growing rapidly. The only thing it lacks is time. "

Qu Weizhi believes that for the development of China's semiconductor industry, "the participation of fiscal capital, local capital, and social capital is very important. Being able to gather more financial resources in a relatively short period of time" has promoted the development of China's semiconductor industry.

However, some investment professionals have warned, "Don't think that a fund of several hundred billion yuan is big. (Semiconductor) technology has high barriers to entry, large investments, and long payback periods. Investing and starting a business in this industry is difficult. There are very clear rules, and you have to pass all the barriers. There will be no miracles. Only persistence can lead to success. "

Although China's semiconductor industry is rising strongly, it must also face up to the gap. For example, in semiconductor manufacturing, giants such as TSMC and Samsung Semiconductor currently use 7 nanometers as the mainstream process, and are planning 5 nanometers and 3 nanometers, while domestic representative company SMIC has just mass-produced 14 nanometers and is breaking through 12 nanometers, while Huahong Semiconductor is mass-producing 28 nanometers and developing 14 nanometers. In memory chip manufacturing, Yangtze Memory Technologies, a subsidiary of Tsinghua Unigroup, also has a large generation gap with Samsung Semiconductor.

In terms of market value, the total market value of the current leading companies in the global semiconductor field, including TSMC, Intel, Samsung Electronics, Nvidia, Qualcomm, etc., is approximately US$300 billion, US$259.3 billion, US$256.2 billion, US$142.1 billion, and US$100.9 billion, respectively. The gap between domestic semiconductor companies is also quite huge.

However, Yang Lei, managing director of Northern Light Venture Capital, believes that "in the next 20 years or more, China will definitely have semiconductor companies worth hundreds of billions of dollars. First, from a macro perspective, semiconductor computing architecture is undergoing earth-shaking changes, and traditional semiconductor companies are facing tremendous pressure to innovate. Second, semiconductor talent in Europe, the United States and Japan is rapidly aging, and there is a trend of semiconductor talent shifting to China. Third, there are not many semiconductor investors left in the United States, while Chinese semiconductor investment funds are extremely active. Although Chinese semiconductor investors lack experience, as long as they are willing to learn, a large number of excellent investors will definitely emerge. "

*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.

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