SMIC's Peng Jin discusses the two real reasons for capacity constraints

"If the IC design industry needs to work hard for another 10 years, I think the manufacturing industry will need at least 20 to 30 years, and 30 to 50 years is normal."

On December 10, Peng Jin, senior vice president of global sales and marketing at SMIC, said this when he delivered a keynote speech entitled "IC Manufacturing Requires Long-term Hard Work" at the ICCAD 2020 Summit Forum.

Peng Jin said that last year, it was expected that SMIC would significantly expand production in 2020 to meet customer needs, including an increase of 25,000 8-inch wafers and 30,000 12-inch wafers. However, in fact, in the past year, the expansion of 8-inch wafers by 30,000 and 12-inch wafers by more than 20,000 was completed, but the production capacity is still very tight, which is mainly related to two reasons.

Peng Jin further pointed out that the first reason is that the market demand growth has far exceeded expectations. The arrival of 5G has driven the demand for chips in mobile phones and base stations. According to Qualcomm's forecast, global 5G mobile phone shipments will reach 200 million this year, 550 million next year, and more than 1 billion in 2023. When mobile phones are upgraded from 4G to 5G, the price of flagship mobile phone chips has increased from US$60-75 to US$100-150, and the number of PMIC chips per mobile phone has also increased from an average of 4-5 to 7-8.

In addition to 5G, the continued upward demand for connected vehicles, IoT/smart homes, and the stay-at-home economy effect of the COVID-19 pandemic have driven a substantial growth in servers and PCs, also leading to a sharp increase in market demand for chips.

Regarding another reason for the tight production capacity, Peng Jin said that it is because the speed of expansion is difficult to catch up with the growth of demand, which is also related to many aspects. On the one hand, under the influence of the epidemic this year, major global suppliers have suspended shipments. Even if the equipment has entered the factory, there is no team to install it, which directly leads to the delay of the expansion of production capacity. On the other hand, the market price continues to rise, and wafer foundries need to be more cautious in expanding production.

Peng Jin emphasized that judgment and investment in capacity expansion should be made based on market and customer demand, because when capacity is opened up one year later, there must be enough market to fill the capacity. In addition to sufficient funds, capacity expansion also requires talent, accumulation of time, accumulation of IP and customer trust.

In recent years, China's semiconductor industry has flourished, and local governments have begun to invest in building factories. Some people believe that so many new factory plans will lead to overcapacity, but Peng Jin said that the combined capacity of all foundries in mainland China is less than 10% of the world's total, and there is still a lot of room for improvement in the manufacturing industry.

Peng Jin emphasized that from the perspective of return on investment, commercial production expansion is difficult to keep up with market demand, but in the future SMIC will continue to expand its production capacity to meet customer needs.

This year marks the 20th anniversary of the establishment of SMIC. The company completed its listing on the mainland's Science and Technology Innovation Board this year. As Peng Jin said in his speech theme, the achievements made by SMIC are inseparable from the long-term hard work over the past 20 years.

Peng Jin revealed that over the past five years, SMIC has invested a total of US$15 billion in production expansion and process research and development.

According to Peng Jin, after 20 years of hard work, SMIC has built a total of 150 process platforms, including 68 processes in Shanghai, 35 processes in Tianjin, 25 processes in Shenzhen and 76 processes in Beijing. In 2020, which was plagued by the epidemic, the company also added 10 processes, including the display field process launched after three years of hard work.

In addition to 150 process platforms, SMIC has accumulated 2,300 IPs, covering 40/28nm (826), 65/55nm (562), 90nm (74), 0.18/0.15μm (355), 0.35/0.25μm (35), and 0.13/0.11μm (478).

However, China's IC manufacturing industry, including SMIC, still needs more long-term accumulation before it can gain a foothold in the global market.

Finally, Peng Jin also pointed out that trade disputes have made system companies worry about supply chain security, and a system that is customer-centric and supplier-partnered is taking shape.