Abstract
From 2000 through 2005, the Chinese IC market registered a compound annual
growth rate (CAGR) of 33% to $40.8 billion in 2005. As China becomes a global
production base for electronic terminals, consumer demand for emerging
multi-functional, highly integrated electronic products is increasing. Memory,
MCUs and DSPs make up 33% in total IC products in China. In 2005, the market
demand for these three groups of ICs was worth U.S. $14.6 billion.
Most of the first 200mm production lines established in the mainland have
Taiwanese background, with proponents including SMIC, Grace and Hejian
Technology. Maintaining low-cost manufacturing capability and providing
foundry service for their existing customers are important considerations for
Taiwanese enterprises. Price is the top consideration in setting up mainland
foundries in addition to being lured by fast-growing markets in the mainland.
Nearly 80% of notebooks supplied by Taiwanese ODMs such as Quanta and Compal
are manufactured on the mainland.
Domestic companies have made impressive inroads into the development and
commercialization of a few specific IC products such as second generation ID
cards, audio decode chips, third generation cell phone base band chips and MP3
chips.
China has a total 650 semiconductor companies, with 200,000 employees. In a
breakdown, the number of IC design companies in the country approached some
500 at the end of 2005, with an annual growth of sales revenue hitting 61.3%
and an employed population reaching 18,000. China' s fab capacity grew 45% from
145,000 equivalent wafers per monthto 210,000, and we expect the same strong
growth in 2007.
As Taiwan has shifted electronic manufacturing to the mainland, the mainland' s
IC design capability has improved dramatically. For instance, communications
ICs are already yielding System-on-a-Chip (SoC)-level products based on
0.13-0.18μm process, while consumer electronics products focus on
0.18-0.5μm process.
There are three major driving forces behind such phenomenal growth. First is
the continuing growth of the domestic market that has provided new demand for
outputs from the industry. China has become the largest manufacturing base for
most consumer electronics products such as televisions, DVDs, personal
computers and mobile phones. These consumer electronics products are fueling
the growth of the China' s domestic IC market. In 2005, the market reached
$40.8 billion, making China the largest IC market in the world with a global
share of 22%.
The second driving force has resulted from the reform of the financial system,
which has substantially improved the investment environment--especially for
foreign investment. Foreign investment now accounts for 80% of total
investment in the IC industry, even when domestic bank loans are taken into
account.
The third driving force is the global recession of the IC industry after 2000.
The recession exerted tremendous economic pressure for multinational
corporations to relocate their manufacturing and R&D activities to China to
take advantage of China' s cost advantage.
While the growth of China' s IC industry has been impressive, there are
noticeable weaknesses of the industry. The industry is dominated by low
value-added IC packaging and assembly, which accounts for half of the
industry' s revenue. High value-added IC design work only generated 15% of the
total revenue in 2005. Most of the 476 IC design companies are very small.
The government is well aware of these shortfalls and policies have been put in
place to support the next-phase growth of the industry. Factor inputs need to
be boosted. In terms of capital, it is estimated that a total of $30 billion
investment will be needed in the coming five years to fuel the growth of the
industry. Yet, the government will cede its role as a director investor in any
IC programs while promoting investments from other sources, being it bank
loans, domestic private investment, foreign direct investment or venture
capital investment. Human resource is another prime area for improvement since
there is a serious shortage of experienced IC engineers. The government has
put in plans to "cultivate 40,000 IC designers and 10,000 IC processing
technologists" over the coming 6-8 years. More importantly, however,
indigenous competence needs to be built. "Independent innovation" has been
identified as a priority for public policy in China' s 11th five-year
development plan, whose goal is not to copy others' chips but instead to have
its own.
Looking into the future, as China' s IC industry and market continue to grow,
China is being integrated into the global innovation system. In the coming
five years, there will be plenty of opportunities for Chinese companies and
universities to collaborate with innovators from abroad, whether it is to
shape next-generation technologies and technical standards, for multinational
corporations to set up research and development centers in China, or for
universities to collaborate on cutting-edge research.
Some of the more positive drivers for the industry' s continued growth are outlined below.
- 1) After more than 20 years of development, China' s electronics
industry has become established as a relatively complete system. The scale of
economy is improving continuously, brand images are being formed, and product
quality is improving. There is now a solid foundation for the future growth of
the industry.
- 2) In China, there is a huge domestic market and a fast-developing
economy; overall production costs are falling; the investment environment has
become more tightly monitored and controlled; sales and distribution networks
are improving; and process manufacturing capabilities have become stronger.
Such changes and improvements make China an extremely attractive option to any
company considering relocating its manufacturing overseas.
- 3) A new wave of industrialization driven by information technology
will open up new business opportunities for the electronics industry to expand
its markets. Fast growth in the sales of computers, software and networking
products is anticipated.
- 4) The new policies for promoting the growth of software products
and the IC industries announced by the State Council are being implemented,
and tax reductions for IC products will be introduced. These factors will
certainly accelerate the development of China' s software and IC industries.
The size of the software industry is expected to increase by more than 30%,
while the IC industry is expected to increase by 40%.
- 5) Exports of electronics products are expected to increase
steadily this year. In the electronics industry, there will be an increase in
foreign investment in factories, joint ventures and cooperative enterprises.
- 6) Growth this year is expected to come mainly from CDMA mobile
phones, HDTVs, computers, networking products, software, etc. These factors
should provide new market opportunities for the electronics industry.
- 7) The restructuring of the telecommunications business is almost
complete. Following these adjustments, the large telecom operators will act to
improve their competitiveness on the market. They will also increase their
investment in the basic infrastructure, providing new opportunities for
communications products and the manufacturing industry.
- 8) After its accession into the WTO, China will regulate the market
in line with WTO requirements. The market economy system will be regulated,
which will further improve the environment for the development of the
electronics industry.
As this report describes, China is rapidly closing the gap on technologies
needed for electronics manufacturing. It can be expected that WTO membership
combined with more aggressive incentives for foreign direct investment will
lead to changes over the next five years that will be significantly greater
than those of the past five years. The priorities described in this report
will continue and will result in a more competitive business environment. We
can summarize the present as follows.
As this report will show, China has access to most of the technologies needed
to manufacture today' s products. Companies are already using leading edge
manufacturing technologies for assembly that include chip-on-board,
chip-on-glass, and chip-scale-packages. While the semiconductor industry
lacks the capacity to meet domestic needs, China' s IC design capabilities are
competitive in the global marketplace. The design of ASICs for advanced
products, like MP3 players and set-top boxes, has been well established. Such
ASICs can be manufactured by any number of firms in Taiwan, Singapore, or
Japan.
Mainland China represents a huge opportunity for semiconductor manufacturers
and equipment and materials suppliers. The emerging semiconductor market will
exhibit growth far in excess of any other country in the 2003-2008 time frame.
This 260-page report analyzes Mainland China' s semiconductor and equipment
industries, examining the technical, economic, and political issues that are
shaping this nascent industry.
Table of Contents
Chapter 1 - Introduction
Chapter 2 - Semiconductor Industry
- 2.1 Introduction
- 2.2 China' s Domestic Semiconductor Market
- 2.3 China' s Semiconductor Infrastructure
- 2.4 Government Goals
- 2.5 Semiconductor Manufacturers In China
- 2.5.1 China Hua Jing Electronics Group Corporation
- 2.5.2 CSMC Technologies
- 2.5.3 Grace Semiconductor Manufacturing
- 2.5.4 Hangzhou Youwang Electronics
- 2.5.5 Huayue Microelectronics
- 2.5.6 Semiconductor Manufacturing Int' l (SMIC)
- 2.5.7 Advanced Semiconductor Manufacturing (ASMC)
- 2.5.8 Fairchild Semiconductor
- 2.5.9 Huaxia Semiconductor Manufacturing
- 2.5.10 Mitsubishi-Stone Semiconductor
- 2.5.11 Shanghai Belling
- 2.5.12 Hua Hong NEC Electronics
- 2.5.13 STMicroelectronics - Hynix
- 2.5.14 Toshiba Semiconductor (Wuxi)
- 2.5.15 He Jian Technology
- 2.5.16 TSMC
- 2.5.17 Ningbo Sinomos Semiconductor Incorporated (NSSI)
- 2.5.18 SIM-BCD
- 2.5.19 Intel
- 2.6 Back-End Manufacturing
- 2.7 Printed Circuit Board (PCB) Manufacturing
- 2.8 Microelectronics Industry Equipment
- 2.9 IC Design
- 2.10 Electronics Components
- 2.11 Role Of Foreign Companies
- 2.12 IC Industry Assessment
Chapter 3 - Market Analysis
- 3.1 Economic Recovery In Asia
- 3.2 Semiconductor Market
- 3.3 Semiconductor Equipment Market
- 3.4 Telecommunications
- 3.4.1 Wireless
- 3.4.2 Internet
- 3.5 Computers
Chapter 4 - High-Tech Sectors
- 4.1 Introduction
- 4.2 Telecommunications
- 4.2.1 China Telecom
- 4.2.2 China Mobile
- 4.2.3 Domestic Competition
- 4.2.4 Foreign Competition
- 4.3 Computers 4-11 4.3.1 Domestic Suppliers
- Lenovo
- The China Great Wall Group
- Tontru Information Industrial Group
- Others
- 4.3.2 Major Foreign Competitors
- 4.4 Optoelectronics
- 4.5 Software
- 4.6 Consumer Electronics
- 4.7 Chemicals
- 4.8 Environmental Industry
- 4.9 TFT-LCD Technology
Chapter 5 - High Technology Industry Development Zones
- 5.1 Introduction
- 5.2 Torch Program
- 5.3 High Technology Industry Development Zones
- 5.3.1 Anhui Province
- Hefei High And New Technology Industry Development Zone
- 5.3.2 Beijing
- Beijing Experimental Zone For The Development Of New Technology
Industries
- Changping Park Of Bez
- Fengtai Park Of Bez
- 5.3.3 Fujian Province
- Fuzhou Science And Technology Park
- Xiamen Torch High Technology Industry Development Zone
- 5.3.4 Gansu Province
- Lanzhou High And New Technology Industry Development Zone
- 5.3.5 Guangdong Province
- Foshan High And New Technology Industry Development Zone
- Guangzhou Tianhe High And New Technology Industry Development Zone
- Huizhou Zhongkai New Technology Industry Development Zone
- Shenzhen Science And Technology Industrial Park
- Zhongshan High & New Technology Innovation Service Center
- Zhuhai High And New Technology Industry Development Zone
- 5.3.6 Guangxi Zhuang Autonomous Region
- Guilin High And New Technology Industry Development Zone
- Nanning New Technology Industry Development Zone
- 5.3.7 Guizhou Province
- Guiyang Xintian New Technology Industry Development Zone
- 5.3.8 Hainan Province
- Hainan International Industrial Park
- 5.3.9 Hebei Province
- Baoding New Technology Industry Development Zone
- Shijiazhuang High And New Technology Industry Development Zone
- 5.3.10 Heilongjiang Province
- Daqing High And New Technology Industry Development Zone
- Harbin High And New Technology Industry Development Zone
- 5.3.11 Henan Province
- Luoyang High And New Technology Industry Development Zone
- Zhengzhou High And New Technology Industry Development Zone
- 5.3.12 Hubei Province
- Wuhan Donghu New Technology Development Zone
- Xiangfan High And New Technology Industry Development Zone
- 5.3.13 Hunan Province
- Changsha High And New Technology Industry Development Zone
- Zhuzhou High And New Technology Industry Development Zone
- 5.3.14 Inner Mongolia Autonomous Region
- Baotou Rare Earth High And New Technology Industry Development Zone
- 5.3.15 Jiangsu Province
- Changzhou High And New Technology Industry Development Zone
- Nanjing High And New Technology Industry Development Zone
- Suzhou High And New Technology Industry Development Zone
- Wuxi High And New Technology Industry Development Zone
- 5.3.16 Jiangxi Province
- Nanchang High And New Technology Industry Development Zone
- 5.3.17 Jilin Province
- Changchun High And New Technology Industry Development Zone
- Jilin High And New Technology Industry Development Zone
- 5.3.18 Liaoning Province
- Anshan High And New Technology Industry Development Zone
- Dalian High And New Technology Industrial Park
- Shenyang New-High-Tech Industrial Development Zone
- 5.3.19 Shaanxi Province
- Baoji High And New Technology Industry Development Zone
- Xi' an New Technology Industry Development Zone
- 5.3.20 Shandong Province
- Ji' nan High And New Technology Industry Development Zone
- Qingdao High-Tech Industrial Park
- Weifang High And New Technology Industry Development Zone
- Zibo High And New Technology Industry Development Zone
- 5.3.21 Shanghai
- Incubator Center Of High-Technology Of China Textile International
- Shanghai High And New Technology Industry Development Zone
- Shanghai Zhangjiang Hi-Tech Park
- 5.3.22 Shanxi Province
- Taoyuan High And New Technology Industry Development Zone
- 5.3.23 Sichuan Province
- Chengdu High And New Technology Industry Development Zone
- Chongqing High And New Technology Industry Development Zone
- Mianyang High And New Technology Industry Development Zone
- 5.3.24 Tianjin
- Tianjin New Technology Industrial Park
- 5.3.25 Xinjiang Uygur Autonomous Region
- Urumqi High And New Technology Industry Development Zone
- 5.3.26 Yunnan Province
- Kunming High And New Technology Industry Development Zone
- 5.3.27 Zhejiang Province
- Hangzhou High And New Technology Industry Development Zone
- 5.4 Free Trade Zones
Chapter 6 - Economic Statistics And Analysis
- 6.1 Economic Climate
- 6.2 GDP
- 6.3 Employment Sector
- 6.4 Inflation
- 6.5 Retail Sales
- 6.6 Foreign Trade
- 6.7 Rural Spending
- 6.8 Investments
- 6.9 Economic Statistics
- 6.10 National Bureau Of Statistics (NBS)
- 6.10.1 Functions And Responsibilities
- 6.10.2 Leadership
- 6.10.3 Internal Setup
- 6.10.4 Overview
Chapter 7 - Domestic Private Sector Issues
- 7.1 Economic Transformation
- 7.2 Private Sector Dynamics
- 7.3 Shift Of Government Policy
- 7.4 Private Sector Financing
- 7.5 New Rules Under The WTO
Chapter 8 - Foreign Investment
- 8.1 Foreign Direct Investment
- 8.2 Turnaround
- 8.3 WTO Pledges
- 8.4 Can China Be Trusted
- 8.5 Venture Capitalists
- 8.6 Sino-Japanese Trade
Chapter 9 - Political Issues
- 9.1 China' s Foreign Policy
- 9.1.1 National Sovereignty
- 9.1.2 Opposing Superpowers
- 9.1.3 Peaceful Coexistence
- 9.1.4 Strengthening Solidarity
- 9.1.5 Relations With Developed Countries
- 9.1.6 Promoting China' s Reunification
- 9.2 One Country, Two Systems
- 9.3 China-Taiwan Relations
LIST OF FIGURES
- 3.1 China' s GDP -- 1980-2009
- 3.2 China' s IC Production -- 1995-2009
- 3.3 China' s IC Consumption -- 1995-2009
- 3.4 China' s IC Production/Consumption Ratio -- 1995-2009
- 3.5 China' s IC Import Requirements -- 1995-2009
- 3.6 China' s IC Supply/Demand -- 1995-2009
- 3.7 China' s IC Fab Capacity - 2000-2009
- 3.8 China' s IC Applications -- 2009
- 3.9 Semiconductor Equipment Forecast
- 3.10 Semiconductor Equipment Market Shares -- 2009
- 3.11 China' s Revenue of Telecom Services - 1999-2009
- 3.12 China' s Mobile and Fixed Line Subscribers - 2009
- 3.13 Cellular Subscribers In China And Asia
- 3.14 China' s Cellphone Market -- 1996-2009
- 3.15 China' s Internet Users -- 1996 - 2009
- 3.16 China' s PC Market -- 1992-2009
- 4.1 Materials Forecast By Region
- 5.1 Map Of Regions Of China
- 6.1 China' s GDP Growth
- 7.1 Percentage Of Private Sector Industrial Output
- 7.2 Employment Growth Rates By Type Of Employer
- 7.3 Sources Of Finance By Company Size
- 7.4 Banking Constraints By Company Size
- 8.1 Direct Foreign Investment -- 1985-2009
- 9.1 Taiwan' s Jobless Rate
LIST OF TABLES
- 2.1 Chinese IC Fab Construction 2004-2009
- 2.2 Chinese Foundry Construction 2004-2009
- 2.3 IC Technology Development In China
- 2.4 Major Packaging And Testing Companies In China
- 2.5 China IC Packaging And Testing Firms: Joint
- 2.6 China IC Packaging And Testing Firms: Wholly-Owned Taiwan Firms
- 2.7 China IC Packaging And Testing Firms: Locally-Owned Firms
- 2.8 China fabless IC design firms
- 2.9 Main Pure-Play Foundry Revenues In China 2007-2009
- 4.1 China' s Leading Export/Import Partners For High-Technology Products -
2008
- 4.2 Main Software Parks In China
- 4.3 China' s Consumer Electronics Production
- 5.1 National High Technology Industry Development Zones
- 6.1 Major Economic Indicators 2008-2013
- 8.1 Foreign Direct Investment In China By Enterprise
- 8.2 Top Ten Foreign Investors In China - 2009
- 8.3 Foreign Direct Investment By Destination
- 8.4 Direct U.S. Foreign Investment -- 1979-2008
- 8.5 Top Venture Capitalists - 2008
