Chinese semiconductor industry

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gelgoog

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It depends. The automotive sector is still growing. And a lot of chips they use do not need the latest technology. Unless you do see some massive need for high density chips for things like autonomous driving the sector of consumer electronics (think TVs and set top boxes) and automobiles will probably still be using DUV for the next decade. The fact either also will have a lot more power available will make the need for more expensive higher end chips in either segment less important. But you aren't going to get rich with chips for cheap consumer electronics like that. Really low margins. And with regards to automobiles unless you make and sell the end product you aren't the one who decides what goes into the product. So even if you could have higher margins, you as the semiconductor designer, or worse the fab might not have the control for it. Vertically integrated companies like BYD basically solve that issue. But car companies will be hard pressed to feed a large fab by themselves. China needs to get into the whole product spectrum I think. And articles like the one here where camera sensor companies are getting into fabrication are probably just the tip of the iceberg. Even if a lot of the foundries do go belly up, they might end up being acquired by companies like that who want to go from fabless to fablite or ODM model.
 
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AndrewS

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Bltizo said:
This is a major prospect I've been sitting on for a while too.

The question being -- by the time that SSA800 and the domestic 28nm supply chain and machinery are ready for commercial production and use by domestic Chinese companies including SMIC, would the production of 28nm node even be profitable? I suppose being a supplier for domestic companies and users who otherwise couldn't acquire 28nm nodes would still be very useful, and with multipatterning they could attain 14nm and give them some breathing space.

And in a national security and technological sanctioning context, continued 28nm production (or 14nm with multi patterning) is still essential.


But the question about whether SMIC and others are able to stay relatively profitable and expand and advance in context of a potential industry scale oversupply at the 28nm node, and get through to be able to reap the intended emergence of equipment allowing them to produce more advanced nodes, is something to consider.
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@gelgoog

1. Remember that upfront design costs keep increasing when you go to a smaller node (see below)
Design costs for a 5nm chip come in at $542 Million which is 11x higher than for 28nm

So if you have semiconductors required in lower volumes, 28nm is far better than 5nm.
This relationship will still hold in the future.

2. Currently Chinese companies import a lot of 28nm semiconductors from overseas.
But once there is additional 28nm capacity in China, I expect most Chinese companies will have their new 28nm designs made in China to avoid the risk of sanctions.
It's also cheaper to build and operate fabs in China than anywhere else in the world, as per the Economist.
I also expect some existing 28nm designs may also migrate to China.

So Chinese fabs will be running at full capacity. In comparison, it will be overseas fabs (particularly in Korea, Taiwan and Japan) which will see fewer orders.



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AndrewS

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gelgoog said:
What I think might happen is SMIC will start shedding some of their fabs if they get squeezed. They already went through a similar cycle in the past so they are used to it.
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I doubt SMIC will get squeezed.

There simply isn't enough supply in China to meet demand. Part of the reason is that companies don't want to rely on semiconductor imports which may be sanctioned.
 
Blitzo

Blitzo

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gelgoog said:
It depends. The automotive sector is still growing. And a lot of chips they use do not need the latest technology. Unless you do see some massive need for high density chips for things like autonomous driving the sector of consumer electronics (think TVs and set top boxes) and automobiles will probably still be using DUV for the next decade. The fact either also will have a lot more power available will make the need for more expensive higher end chips in either segment less important. But you aren't going to get rich with chips for cheap consumer electronics like that. Really low margins. And with regards to automobiles unless you make and sell the end product you aren't the one who decides what goes into the product. So even if you could have higher margins, you as the semiconductor designer, or worse the fab might not have the control for it. Vertically integrated companies like BYD basically solve that issue. But car companies will be hard pressed to feed a large fab by themselves. China needs to get into the whole product spectrum I think. And articles like the one here where camera sensor companies are getting into fabrication are probably just the tip of the iceberg. Even if a lot of the foundries do go belly up, they might end up being acquired by companies like that who want to go from fabless to fablite or ODM model.
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My overall point is whether SMIC and other companies are capable of being sufficiently profitable to expand into the subsequent more advanced segment once the domestic tooling and EUVL arrive.
 
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gelgoog

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At this point they are. They should still be in 2 years time. But I doubt they will get access to EUVL by then.
One thing that China probably should consider is to go into 450mm wafers. They are probably the only market that can justify that kind of volume. And 450mm wafer tools don't exist anywhere else. It is a huge fixed cost to get into it but requires little new actual technological development.
 
ZeEa5KPul

ZeEa5KPul

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Bltizo said:
My overall point is whether SMIC and other companies are capable of being sufficiently profitable to expand into the subsequent more advanced segment once the domestic tooling and EUVL arrive.
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There's enough runway just on import substitution alone. They'll remain profitable for at least the next decade no matter what happens with prices so long as they take market share from foreign producers, which I think they will given that the state will almost certainly back them (by essentially forcing chip consumers to buy from them) once they reach technological thresholds.
 
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ansy1968

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gelgoog said:
At this point they are. They should still be in 2 years time. But I doubt they will get access to EUVL by then.
One thing that China probably should consider is to go into 450mm wafers. They are probably the only market that can justify that kind of volume. And 450mm wafer tools don't exist anywhere else. It is a huge fixed cost to get into it but requires little new actual technological development.
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@gelgoog 450mm means 18 inch wafer? Here I agree with you completely, since China are starting from scratch better to invest NOW while the industry is still growing.
 
Blitzo

Blitzo

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ZeEa5KPul said:
There's enough runway just on import substitution alone. They'll remain profitable for at least the next decade no matter what happens with prices so long as they take market share from foreign producers, which I think they will given that the state will almost certainly back them (by essentially forcing chip consumers to buy from them) once they reach technological thresholds.
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I'm sure they'll be able to make some profits, and the strategic nature of the industry mean they will continue to survive with state policies.

But the degree of profitability to effectively make use of the new lines when they arrive I believe remains at the very least, murky.
 
ZeEa5KPul

ZeEa5KPul

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Bltizo said:
I'm sure they'll be able to make some profits, and the strategic nature of the industry mean they will continue to survive with state policies.

But the degree of profitability to effectively make use of the new lines when they arrive I believe remains at the very least, murky.
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It's a relative thing. Things should be fine so long as SMIC's profitability is not disadvantaged relative to its competitors. In fact, a crunch in profitability throughout the entire field can play to China's strengths since SMIC would have the backing to survive the storm while companies in other countries wouldn't. The concern is whether SMIC is a well-run company that can make use of its advantages, which it appears so far to be.

In terms of absolute profitability, the field has always been one of tight margins and brutal competition; it's why the US quit and left it to the likes of Korea and Taiwan. I see semiconductors as something of a public utility like high-speed rail - the trains themselves don't have to rake in the profits, their downstream economic effects are what's important. China having a world leading indigenous semiconductor sector has enormous benefits for downstream technology companies.
 
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