Opportunities Abound in China’s Semiconductor and Solar Industries
By Lily Feng, senior analyst manager, SEMI Industry Research & Statistics
China’s government unveiled a 4-trillion-yuan (US$586 billion) stimulus package in November 2008, with the funds to be distributed over the next two years. This package promises to address the financial turmoil that is impacting the global economy and provide a welcome cash infusion to China’s commerce. In addition to investments in the macro economy, the Chinese government also remains the biggest investor in the semiconductor industry in China.
In the past five years, the China government influenced the investment of about $7 billion in new fabs. In the next five years, another $20–$25 billion will be invested in the semiconductor industry by local governments throughout the country. Going forward, the central government will invest up to $30 billion in the industry by 2020.
Local equipment suppliers in China are also expected to receive various forms of government incentives. There are 11 semiconductor equipment projects included in the 11th five-year-plan that will be executed in the next three years (2009-2012) to develop 65-90nm front-end and back-end semiconductor equipment. Government support will be a key factor to the success of these ventures.
Apart from growing through government support, local equipment suppliers in China also work closely with foreign equipment suppliers to develop the domestic market. Local equipment suppliers provide immediate access to the China market and are open to collaborate with foreign equipment suppliers to develop technology and worldwide sales. Examples include the collaboration between CETC 45 Research Institute and Strasbaugh for their CMP equipment; Applied Materials and Xi’an Crystal Growing Technology for crystal growing furnaces; and SMEE and Ricmar for packing, sorting, and coating Equipment.
In 2008, local equipment suppliers also gained considerable profit from sales into the solar market. Other than traditional suppliers like CETC 48 and Sevenstar, who generated revenue from solar sales and then reinvested those monies into the semiconductor area, equipment manufacturers that focus on high-end semiconductor equipment have made advancements in thin film equipment used by the solar industry.
Government influence can also be found for solar industry. Two well-known companies include Suntech and LDK, which have both received support from government. Wuxi’s local government co-invested in Suntech with US$6M to start the company in 2001 and during 2001-2005, Suntech received another $5M from the government. LDK received US$25M from local government in the 2005-2006 timeframe and listed in the New York Stock Exchange within a year.
Investments related to polysilicon manufacturing have also received a lot of attention due to the dramatic price change for this critical starting material. Among the polysilicon projects announced in China, there were 15 projects in production by the end of 2008 with a total production volume approaching 4,900 metric tons. Some of these producers have already signed long-term contracts with customers, with a reported average price in the range of $100/kg.
In addition to the polysilicon investments, aggressive expansion by solar cell manufacturers in China has occurred over the past several years. Leading cell manufacturers, who represent about 65 to 70 percent of the China cell market, doubled their capacity in 2008, and have plans to increase capacity another 75 percent in 2009. Cell production, however, has faced some constraints in the past year. Cell production was constrained by a shortage of silicon from Q1 to Q3 2008, but it has recently faced declining demand. For the first time, the industry experienced over capacity. In the current environment, the ramp in cell production has slowed down
Both the semiconductor and solar industries are influenced by events surrounding the current global recession; however, China’s semiconductor and solar industries will continue to see growth and opportunities with support from China’s government.
For additional information and market insights on the China fabs, please refer to the China Domestic Fab Equipment Suppliers, China Equipment Subsystems, Components, and Parts Vendor Overview. An updated China Wafer Fab and Foundry Report and a China Solar Report are expected to be released later this year. Please also visit www.semi.org/marketinfo for more articles and information on fab databases and other marketing reports.
Feb 3, 2009