Industry Luminaries Outline China’s Semiconductor Growth Prospects (Part 2 of 2)
By Jonathan Davis, Global VP of Advocacy, SEMI
SEMICON China, held recently in Shanghai, provided important new perspectives into the region’s position in the global semiconductor industry from key industry leaders and further insight on the new development policies from key government authorities.
Part 1 of this series covered insights and commentary from the policy makers and fund managers behind the new national investment program. This article covers perspectives on the growing market opportunities expressed by leading global and domestic technology executives speaking during the event.
Dr. Lisa Su, AMD
Striking an optimistic tone as the SEMICON China opening keynote speaker, AMD president and CEO Dr. Lisa Su said that, “There has never been a better time to be in the semiconductor industry.” She proceeded to declare that China is at the center of semiconductor industry growth prospects for many companies. AMD has a 45-year history. Of that, the company has had a presence in China for 22 years. It has grown with the region – beginning with a sales office in 1993, and now operating an assembly plant in Suzhou. Today, 25 percent of the company’s employees are in China.
She stated that much of the new industry investment will be occurring in China. As an indication of the country’s substantial technology capability, Su reflected on supercomputer performance improvement, which has increased 10,000 times from 100 gigaflops in 1993 to 33 petaflops today. She noted that China now has the world’s fastest supercomputer.
Semiconductor unit shipments have grown at greater than an 8 percent compound annual growth rate between 1984 (74 billion units) and 2014 (766 billion units). However, Su sees massive data as a catalyst and huge driver of semiconductor content beyond the proliferation of new devices and applications.
Putting the magnitude of data in perspective, she that the “Internet of Things” and emerging era of immersive computing and will bring about 50 billion connected devices by 2020. Even more impressive than the number of devices will be the staggering amount of data generated, which Su believes will grow more than 100 times from 0.5 zetabytes in 2009 to more than 44 zetabytes in 2020. The challenges in reaching this figure include the diminishing returns on the economics of process scaling and power efficiency. By 2020, electronics will account for 14 percent of the global electricity demand. Addressing this will require the integration of multiple components on a chip for greater performance, 2.5D and 3D chip stacking, as well as advancement and standardization of software.
Shiuh-Wuu Lee, SMIC
Shiuh-Wuu Lee, executive VP, Technology Development, SMIC spoke of the company’s rapid rise to become the largest and most advanced foundry in mainland China. He recounted that SMIC was China’s first mass production 8” fab in 2002 and first 12” fab two years later. In 2009, the company became the first Chinese foundry to achieve 65/55nm revenue. SMIC became the first Chinese foundry to manufacture 28nm high-k metal gate devices in 2013, and by 2014 the first to introduce 38nm NAND.
Lee claimed that the company is now consistently profitable and reported 11 consecutive quarters of positive net profits since the second quarter of 2012. He also said that 30 percent compound annual revenue growth is occurring from China’s fabless customers.
Lee said that SMIC is “pushing on all fronts” with 28nm manufacturing process to be ready this year and that 14nm FinFET is in development. SMIC balances investment between specialty and advanced technology. The 8” Fab #15 located in Shenzen has begun operations and is expected to reach 20,000/month wafer starts by the end the year.
Lee also posited SMIC as a technology and innovation leader. With 4,174 patents, SMIC stands among China’s top 5 companies. The list includes 270 equipment-related patents. Additionally, the company partners with 116 local suppliers and drives technology development in backend, IP and EDA.
SMIC also established its Semiconductor Advanced Technology Research Corporation in October 2014 to create leading-edge mass production technology capabilities. Currently the R&D center is collaborating with design houses, fabless companies and universities to advance 14nm FinFET manufacturing capability.
Simon Yang, XMC
Simon Yang, president and CEO of XMC, said that, “The situation is very exciting in China and everyone is poised to move forward.” He said that total IC sales in China experienced significant growth in the last 5 years to reach $49 billion (CNY 301.5B) in 2014. However, the wafer fab market share growth has been stagnant. Chinese wafer fabs’ revenue represents only 2.5% of the worldwide share and virtually no share of the most advanced technology nodes (N to N-2).
He now sees a new industry environment with a sustained strength of the local IC market and a strong drive for consolidation. Plus, with the end of China’s real estate boom, he expects greater availability of funds from private sources.
However, even with a relatively long view embodied by the 10-15 year policy horizon and “patient capital” he sees many challenges and characterizes himself as “a tiny fish trying to swim fast in an ocean with a lot of competitors.” China’s share of worldwide foundry business is stagnant and China’s wafer fab revenue only represents about 2.5 percent of the world total. While top officials have recognized the impediments, Yang sees fundamental difficulties of advanced fab operations in China. He says there are no cost advantages, and no market protections (compared to industries like automobile). Labor is the smallest issue for an advanced fab. And while China has 1/3 the cost of the US, it remains 3 times that of other developing countries.
Yang hopes to be a unique and differentiated player in IoT. He believes that China must enter higher density memory and that catching up with technology is essential. He also calls for an improved depreciation rate for a competitive cost structure, retention of top talent and progressive decision making systems that value accuracy, risk-taking and speed. In considering how aggressive to be in guiding the investment strategy of a smaller domestic enterprise, Yang said that those in his situation face two choices, “One appears safe, but is certain death. The other is to take on very high risk, but you might just win.” XMC’s strategic plan call for aggressive advances in memory, 3DIC and SoC logic production.
As one of only three advanced 12” IC fabs in China, XMC made a decision to compete at the high end. The company’s growth strategy entails intensified international collaboration, innovative technologies for emerging markets, the launch of 3D NAND program and plans to initiate and embrace consolidation. XMC’s IP portfolio and manufacturing partnerships include joint R&D for 3D NAND with floating gate core IP licensed from Spansion; IP logic licensing from IBM including 65nm RF, 45nm and 65nm LP; and development of an advanced IoT platform in China with ARM and SST. Furthermore, the company boasts 1,600 IC related patents from universities and R&D institutes.
Michael Hurlson, Broadcom
Michael Hurlston, who is Broadcom's executive VP of Worldwide Sales, said, “China is at a crossroads – from import[er] to design and development.” He said that China lags on PC and smartphone technology, but his prediction is that it will be at the forefront of IoT with a proliferation of applications of home automation, wearables, medical monitoring and outpatient care and numerous smart devices.
Hurlston was most positive on Chinas role in the “Internet of Vehicles” and asserted a huge opportunity in automobile electronics. At 11 percent growth, he sees auto is the fastest growing IC segment over the next 10 years. By 2020 there will be more than 1,000 chips per vehicle and China has already surpassed the US to be the largest passenger car market. By 2020, he says it will be 2x the US market.
Handel Jones, IBS
Handel Jones, founder and CEO of International Business Strategies, Inc. (IBS) said that China is transitioning from a follower to a technology leader and must evolve to provide application solutions.
Historically, the driver was equipment designed by foreign company technology leaders such as Apple, HP, Cisco, Sony and others who controlled the product features and architecture. Now, Chinese electronics companies such as Huawei Technology, Lenovo and Xiaomi are competitive in global markets. With the migration to more advanced products, semiconductor vendors will capture more of the system value of electronics.
Jones agrees with other speakers that Chinese companies dominate the automobile market but is less enthusiastic about the sector in driving domestic chip demand because most components currently come from outside of the country. He said that it is important for Chinese semiconductor companies to select product areas where there is high market leverage as well as the ability to compete in global markets beyond China.
Jones says that market forces alone will not close the gap if semiconductor manufacturing is indeed regarded as a high domestic priority. Rather, he believes, China needs systematic approach that entails alliances and acquisitions. He said, “China-only growth is insufficient. China must be good enough to win in global markets.” He characterized the new IC industry development policies as, “a once-in a lifetime opportunity
The rate of domestic technology development is too slow to compete in global markets and that it is unlikely that the gap can be closed with tech leaders. The best approach is gaining access to competitive products is through strategic partnerships with common long-term goals and structures that equitable financial returns. Conversely, he said that successful foreign companies will realize better financial returns through strategic partnership with Chinese companies rather than through the establishment of sales organizations.
For Part 1 of this article on the presentations at SEMICON China 2015, please click here.
Read more about the China Market at China Market Central at www.semi.org/marketcentral
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SEMI Global Update
May 6, 2015