By Clark Tseng and Dan Tracy, SEMI
From 2004 through 2014, over $70 billion was spent on semiconductor equipment and materials in China. Over this period, the assembly and packaging infrastructure showed particular growth and development as both overseas and China-headquartered companies increased manufacturing capacity and capabilities there. China now captures about one third of the annual global spend for assembly and packaging equipment.
While a number of important fabs were established over this same period, the installed fab capacity in China represented less than 10 percent of the worldwide total by the end of 2014, with China manufacturers lagging overseas counterparts in leading-edge fab process capabilities. Overseas companies currently operate some of the most advanced fabs in China, as strong demand and the rising prominence of Chinese electronics OEMs were critical factors in attracting foreign semiconductor companies to set up facilities there.
In 2014, the Chinese national government issued guidelines to support and promote the creation and development of an indigenous IC industry in China. The national guidelines directed the development of the China semiconductor industry so manufacturing capabilities across the supply chain would reach leading-edge capabilities comparable to international levels. The IC industry is at the core of the information technology industry and is a critical element for strengthening economic and social development in China. In other words, the Chinese government considers the IC industry as a strategic, fundamental, and leading industry.
The guidelines included specific policies for the creation of investment funds to boost the China IC industry. With these policies and investment funds in place, there has been a surge in fab investment activity in China, and fab projects that are already announced and upcoming in the near future will be key drivers for the global semiconductor equipment market over the next several years and possibly longer.
SEMI is currently tracking 20 new fab projects—and there is potential for more—in China; unlike previous fab investments, China company/investment funds (champions) will be the key drivers behind these projects. Based on our current understanding of announced and potential fab projects, fab equipment related spending in China could be propelled to over $10 billion or more per year by 2018 and remain at the level over several years (The forecast estimate is subject to change depending on actual execution):
Such spending momentum will drive China to the top-tier bracket for fab equipment and is paving the way to establish China’s position on the global semiconductor stage. Spending in foundry and memory segments and for 200mm fabs is forecast to be strong. For 200mm fabs, the investment activity is driven in part by rising domestic demand for mature nodes and also the government’s plan to increase IC self-sufficiency rates. In contrast to recent years where investments by overseas companies represented a majority of the fab investments in China, China “champions” are now emerging as the dominant investment drivers, likely representing over two-thirds of the fab investment activities by 2019 and beyond.
As these investments will unfold over the coming years, China will be faced with several challenges that could impact the timing for execution of some of these projects. The China IC companies, and their local supply chain, will likely encounter challenges in terms of IP protection, access to talent, and may overly rely on government support initiatives and funding. These companies will need to establish solid business models and core competencies to “go global” and to avoid competing on pricing only.
While acknowledging these challenges, it is evident that China will be a critically important market for companies throughout the semiconductor industry supply chain, as there is no shortage of capital for semiconductor fab projects. Global supply chain players need to be in position to partner and collaborate with companies in China if they want to take advantage of the expected fab investment surge.
Don’t miss SEMICON China 2017, the leading exhibition for China's semiconductor industry, which will be held on March 14-16, at the Shanghai International Expo Center. SEMICON China 2017 serves as a great platform for exhibitors and visitors to explore the entire electronics manufacturing supply chain in China. Key events and programs around investment activities and the supply chain include:
- Tech Investment Forum
- Build China's IC Ecosystem - Advanced Manufacturing, Assembly & Test
- Build China's IC Ecosystem - Equipment and Material
Please visit www.semiconchina.org for more details about programs and events during SEMICON China 2017!
To learn more about the China semiconductor market, visit our China Central information hub.
January 4, 2017