With frequent trade wars between China, the United States, Japan and South Korea, what is the path for China's semiconductor development?

The US-China or Japan-South Korea trade wars are all based on the field of science and technology, and both involve the semiconductor level, reflecting that semiconductors are the main battlefield of the science and technology competition. Semiconductors are one of the foundations and core industries of the modern information industry, and are an important indicator for measuring a country's level of scientific and technological development and even its comprehensive national strength.

More importantly, a trade war between the United States and China or between Japan and South Korea will undermine the business trust and free trade rules on which the global vertical division of labor is based. In the future, countries may pay more attention to supply security and independent control. Whether this will lead to waste of resources, low efficiency in R&D and investment, etc. is worth pondering.

Even though the United States is the world's leading semiconductor supplier and has the highest international added value and technological content, the proportion of Chinese business in American semiconductor companies is over 30%, not to mention that the total Chinese customers of some major American semiconductor manufacturers account for more than 50%. Therefore, the performance of American semiconductor manufacturers has been relatively affected by the US-China trade war.

Similarly, although China's semiconductor industry has grown rapidly in recent years, some links have not yet broken through the bottleneck, and the industry chain is not fully covered. Naturally, the US side has attacked the supply of key core chips in the US-China trade war by means of tariffs and non-tariff trade barriers. In view of this, it is expected that China will continue to use semiconductor support policies, the investment of the second phase of the integrated circuit big fund, the accumulation of internal and external human resources, and the deeper integration of the capital market and technological innovation through the Science and Technology Innovation Board to accelerate the direction of China's own semiconductor domestic substitution. It is expected that based on the new products driven by emerging technologies in the future and the new division of labor brought about by the trade war, China's semiconductor industry will enter a stage of structural reform with improved technical capabilities, increased innovation vitality, and diversified products.

The performance of China's semiconductor industry this year has generally shown a situation of first decline and then rise. This is mainly because although there are still variables in the future of the US-China trade negotiations, at least in the short term, the strict ban imposed by the United States on Huawei from May to June has been relaxed at the beginning of the third quarter, which has increased Huawei's supply chain orders in the second half of the year. At the same time, the reshaping of Huawei's ecological chain is also beneficial to China's local semiconductor manufacturers. Obviously, the US-China trade war has accelerated the rise of the core link of the domestic supply chain, and the inventory level of the semiconductor supply chain has continued to decline. In addition, business opportunities such as 5G wireless communications, AI, IOT, wearable devices/AR/VR, automotive electronics, high-performance computing/data centers, Industry 4.0/smart manufacturing will also gradually ferment.

Judging from the development of China's wafer foundry in 2019, it is still mainly about catching up and breaking through advanced processes and differentiated competition in special processes. The latter is used in products including DRAM, analog IC, optical devices, sensors, discrete devices, etc. Among them, SMIC focused on promoting FinFET technology in 2019. The Shanghai SMIC South FinFET factory was successfully built and entered the capacity deployment. The company also plans to realize the 14nm FinFET mass production plan in the second half of 2019. At the same time, the 12nm process development has entered the customer introduction stage. Obviously, SMIC wants to take advantage of the decline in the capacity utilization rate of TSMC Nanjing Plant and is considering slowing down the pace of increasing capacity, so as to shorten the gap with TSMC's layout in China. However, as TSMC's advanced processes in Taiwan plants have gradually entered the 7nm enhanced version, 6nm process, and 5nm process, SMIC is still in the stage of catching up.