Chinese semiconductor industry

@european_guy bro a good summary plus it stated what we already knew, there is a huge demand in China and the plan $150 billions investment may not satisfied those demand and may need even more.

China’s semiconductor industry: Seeking for self-sufficiency amid tensions with Taiwan and the US chip export ban​

• September 28, 2022
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Semiconductors are the brains of all electronic devices, from microwaves to mobile phones and from drones to automobiles. They are essential components that allow the development of technologies crucial for economic growth, national safety, and global competitiveness. Therefore, countries are competing to win the semiconductor industry race and gain a competitive edge. However, with the US recently implementing a chip export ban on China and the growing tension with Taiwan, China’s semiconductor industry stability and growth are under threat.

Breaking down the global semiconductor industry​

To understand the power and position of China and other countries in the semiconductor industry, we have to know how semiconductors are made and then split the industry into smaller pieces. Essentially, semiconductors are created through steps: design, manufacturing, and assembly. We can also divide the semiconductor industry into major segments based on their role in the value chain:

1. Design: companies that design integrated circuits (ICs) for a specific purpose.
2. Manufacturing: companies that fabricate the ICs.
3. Assembly/Packaging/Test (APT): companies that assemble the ICs into a chip which is then integrated into electronic devices (smartphones, computers, automobiles, etc.) by product manufacturers.
4. Semiconductor manufacturing equipment: companies that manufacture the capital goods used by the companies in other segments to carry out and automate their functions.

While some companies adopt an Integrated Device Manufacturers (IDM) business model –combining design, fabrication, and packaging functions– there has been a noticeable trend towards specialization over the past few decades. Thus, most semiconductor companies today focus only on one of the four supply chain segments:

• Pure-play design (Fabless) companies–purely focus on creating
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  and intellectual property without actually manufacturing anything.
• Pure-play manufacturing companies (Foundry) –manufacturing chips for Fabless companies.
• OSAT (Outsourced Semiconductor Assembly and Test) companies –specialized in the APT segment.
• Equipment manufacturing companies

Source: Forbes, designed by Daxue Consulting, semiconductor industry structure
Fabless companies require high skill levels and high R&D costs, spending of their income on R&D. Semiconductor foundries are capital-intensive due to the expensive facility and equipment costs, while assembly companies are labor-intensive. The pure-play Fabless Business Model dominates on other business models. In fact, pure-play design companies 56% more value than foundries, 4 times more value than IDMs, and 11 times more value than IC Packaging companies for every US dollar of sales of the products.

The landscape of China’s semiconductor industry​

Globally, of semiconductors were distributed in 2021, around 146 units for every person on Earth. Taking the number one spot, China manufactured of the world’s semiconductors in 2019. Despite that, China is a net semiconductor importer. In 2020, China imported chips with a total value of , a 14.6% increase from the previous year. In the same year, China’s semiconductor industry consumed nearly a quarter, , of the global semiconductor-enabled electronic devices.
In 2021, the Chinese semiconductor industry experienced a rapid in revenue for fabless, foundry, IDM, and OSAT, corresponding to yearly growth rates of 36%, 32%, 23%, and 23%, respectively.
Data source: Semiconductor Industry Association (SIA) Analysis, designed by Daxue Consulting, top 10 Chinese semiconductor firms by revenue in 2020

China’s efforts to cut dependence on the US​

Although China has already started the journey to in 2014 after China’s State Council released the “National Guidelines for Development and Promotion of the Integrated Circuit (IC) Industry” and a year later when the Chinese government initiated “”, a 10-year comprehensive strategic plan to reduce the country’s dependence on foreign technology imports, they are picking up the pace recently. The US-China that began in 2018 and the famous Huawei could be the reasons behind the increase in development speed.

• The National Integrated Circuits Industry Development Investment Fund (Big Fund) which was established in 2014 to finance China’s semiconductor industry had a second round of state financing in 2019. Until July 2021, Big Fund has allocated
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  to China’s semiconductor industry.
• The Chinese semiconductor industry’s sales jumped to
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  in 2020, exceeding Taiwan’s for two successive years.
• China the largest market for semiconductor equipment for the second time in 2021 reached
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  , a 58% increase.
• Semiconductor Manufacturing International Corporation (SMIC) accomplished a major
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  by advancing to a quasi-7nm process in two years, faster than Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung.

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continue....

Comparing China’s and the global chip industry​

When it comes to sales, the US semiconductor industry is at the front with a market share. On the other hand, China’s semiconductor industry is lagging far behind with a 5% market share, after South Korea (20%), Japan (10%), Europe (10%), and Taiwan (7%).
Data source: Semiconductor Industry Association (SIA) Analysis, designed by Daxue Consulting, 2020 global market share
In general, The US semiconductor industry the market in areas that demand intensive R&D such as EDA (Electronic Design Automation) and core IP (Intellectual Property), chip design, and manufacturing equipment. On the other hand, Asia dominates in areas that require intensive Capital expenditure and labor such as raw materials, water fabrication, and APT.
Taking a closer look at who are the of each segment, we have the US semiconductor industry in the fabless segment, Taiwan in the foundry segment, and Japan, The Netherlands, and the US are sharing the lead in the manufacturing equipment segment. Meanwhile, the Chinese semiconductor industry holds a modest but vulnerable position in the low-value packaging segment as it is not powerful enough to exert considerable economic impact.
All four segments are important and interrelated, a disturbance in one will impact the whole chain. However, chokepoints –when a certain company has power over crucial supply chain links in certain segments that can create bottlenecks – do exist.
Image source: Semiconductor Industry Association (SIA) Analysis, value added in the semiconductor industry by country

The chip export ban and tension with Taiwan on China’s semiconductor industry​

After the conflict between Russia and Ukraine broke out, the US government advanced technology export to Russia to impede its economic and military development. The country then the export ban to China using “to keep advanced technologies out of the wrong hands” as the motivation.
On August 2022, the Biden administration the export of artificial intelligence (AI) computing chips to China specifically Nvidia Corp’s and Advanced Micro Devices Inc.’s (AMD) chips. Taking a further step, the US authority is also now devising plans to extend the ban to semiconductors used in AI and chipmaking tools with KLA, Lam Research, and Applied Materials as the three targeted companies.
China’s AI industry currently on Nvidia and AMD. Thus, China’s semiconductor industry, especially its , is undoubtedly affected. We can consider the ban –on Nvidia and AMD– as the first chokepoint for China.
China’s second chokepoint is TSMC, the largest foundry in the world. Over 90% of highly developed nodes and 50% of global semiconductors are produced by TSMC. The Chinese semiconductor industry relies heavily on TSMC. In the first half of 2022 alone, China imported ICs from Taiwan with a total value of , 15% more than in 2021 and accounting for almost 38% of the country’s total such imports during the period. Thus, unlike other sectors, China does not impose sanctions on chip imports from Taiwan even amidst the growing tension with the country, specifically after the visit of the Speaker of the United States House of Representatives, Nancy Pelosi, in August 2022.

China’s chip industry’s potential responses​

Fabless segment​

First is the fabless segment. The semiconductor industry is generally divided into logic –the building blocks of chips–, memory –storing data and code information–, and DAO (discrete, analogue, and others). This segment is largely dominated by the US, especially for logic chips. Thus, China would have to increase their R&D expenditure to develop logic chips. On the other hand, since South Korea and Japan, respectively, are the leaders in memory and DAO chips, China can rely on those countries at least in the short run while developing their own for the long run.

Foundry segment​

In the foundry segment, SMIC has been making plans to build more plants and receiving fund support from various local governments. The company received US$2.25 billion in government funding from the Big Fund. In 2021, SMIC’s new chip factory in Shanghai was partially financed by China’s state-affiliated chip fund. In the same year, the Chinese foundry firm was also building a plant in Shenzhen, of which 23% is owned by the local government. Then on August 2022, SMIC announced that it will be constructing a wafer production line in Tianjin.
Undoubtedly, China is slowly making moves to decrease dependency and compete with TSMC in the future. With the rising tension with Taiwan, we would probably see similar occurrences: private-public collaborations, where a private entity drives more efficient private capital toward achieving national objectives. Yet, the foundry segment still has a long road ahead.

Semiconductor manufacturing equipment​

The US government is attempting to prevent the sales of semiconductor manufacturing equipment to China. Manufacturing equipment is currently dominated by the US, the Netherlands, and Japan. The US officials managed to ASML, a Dutch company and one of the world leaders in semiconductor manufacturing equipment, from exporting its extreme ultraviolet (EUV) lithography to China in early 2020. Recently, the US once again pressured the company to exporting its other technology –deep ultraviolet (DUV) lithography. Japan is the other viable option; however, the Biden administration is extending the pressure to Japan vis-a-vis Nikon’s DUV machines.

The future of China’s chip industry​

According to an IT columnist, Chinese chip makers need an that could support their expansion rather than the technology required to create high-end chipsets. Despite having already received a of investment from the government, funds were not efficiently and strategically allocated. The Chinese semiconductor industry on state-owned enterprises (SOEs). As a result of SOEs’ poor management, inefficient production, and wasteful expenditure due to the backing received from the government, the semiconductor industrial plans were hampered as they only produced chips that fail to gain commercial success. However, there has been a crackdown on Big Fund recently which will bring the semiconductor industry in China a step forward in the right direction.

What to know about China’s semiconductor industry:​

• China is a net importer of semiconductors. The country is one of the largest purchasers of semiconductors in the world and is also a dominant player in the manufacturing of less sophisticated chips.
• China’s semiconductor industry occupies a modest but vulnerable position in the low-value packaging segment as it lacks the strength to wield a significant economic influence.
• The chip export ban, dependence on TSMC, and the difficulty to obtain semiconductor manufacturing equipment are the three major chokepoints for the semiconductor industry in China.
• We would most likely observe numerous strategies and efforts from both the Chinese government and semiconductor companies to achieve self-sufficiency. The private-public partnership is one of them.
• China’s central government would almost certainly take stronger control to create an ecosystem that can cultivate the semiconductor industry in China, no longer heavily dependent on SOEs.

ansy1968 said:

EU semiconductor investment not nearly enough, warns chip boss​

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Simply put, EU lacks both the money and the ambition to reach even half of that target. EU gave up on advanced logic decades ago, and now it is gone forever. The 2030 target is just political posturing, eventually EU will give money to some foreign firm to build some sub-state-of the-art fab here....that's the best we can aspire to. But IMO even that will be difficult.

european_guy said:

Simply put, EU lacks both the money and the ambition to reach even half of that target. EU gave up on advanced logic decades ago, and now it is gone forever. The 2030 target is just political posturing, eventually EU will give money to some foreign firm to build some sub-state-of the-art fab here....that's the best we can aspire to. But IMO even that will be difficult.

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It would make sense if the EU had like multiple SiFive and T-Head level company creating RISC-V/Arms IP designs and had multiple companies like Huawei, Xiaomi, Apple, Intel and Google that would license those design and order fab capacity.

Looking at the numbers all EU really can do is force EU fabricated chips within the EU region, so that is like around 500 million people market size not even 10% of total world market. But will the US accept such a ruling because that would pretty much reduce US fabrication to like 370 million people. This is all assuming people actually can afford high end consumer semiconductor products in the next decade.

My guess is that 500 billion euro request is just a slush fund to enrich themselves.

@european_guy and @BlackWindMnt bro, China is in a Goldilocks Economy especially its Semiconductors sector, at this stage of its IC development we can service the ROW, with the downturn we may take a slice of the Golden Billions as shown by Apple YMTC deal. With cheap energy input plus excellent infrastructure, we can rapidly increase capacity, so the 25 FABS in 5 years posted by @PopularScience may not be enough as we come from a low base to begin with. So maybe the strategy of out producing and out investing your competitor may work as we can price out the competition...lol

horse said:

I read about that Chinese GPU in this very thread.

Research it yourself. Lots to learn.

As for the data centers and supercomputing, I do not believe you got a clue of what you are talking about.

China's data centers that they have operating, and its vendors are selling, and the supercomputers, those belong to China. Any new bans will not affect what China already owns and is operating.

Any future products and development in data centers and supercomputing, that will be American free. China and America agree on that point. No more US tech in Chinese products in the future.

Huawei is big player in the data center as a vendor. Very doubtful they have many US parts in those products.

Go do the research yourself to verify everything written here in this post.

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So Chinese companies like huawei have been stockpiling chips, and still there is excess supply? It looks like there are so many chips in warehouses worldwide.

henrik said:

So Chinese companies like huawei have been stockpiling chips, and still there is excess supply? It looks like there are so many chips in warehouses worldwide.

Click to expand...

My take bro, Huawei bought a lot of SMIC unfinished 14nm or even N+1 and N+2 7nm chips (thus unlisted) and they do the packaging themselves. They had done it before with TSMC unfinished 7nm and 5nm before the deadline approaches.

Unexpectedly, the new 5nm Kirin Kirin 9006C came out. Who is OEM for Huawei?​

Due to changes in the international situation and changes in the US semiconductor market rules, Huawei's Kirin chips were forced to suspend production after September 2020.
As we all know, the Kirin chip is Huawei's self-developed chip, which has been applied to Huawei mobile phones before. After the production of Kirin chips was discontinued, the output of Huawei's mobile phones was inevitably affected, which led to a decline in mobile phone sales.


Zhongguancun Online reported on December 3 that Huawei's new MateBook still uses the Kirin chip, and it is the Kirin 9006C that has never appeared before.
It should be noted that this processor, named Kirin 9006C, uses a 5nm process. Not to mention the performance of this chip, the use of the 5nm process alone is surprising enough.

You know, looking at the world, only TSMC and Samsung can achieve mass production of 5nm process , but these two foundries are unlikely to produce advanced 5nm process chips for Huawei at this time.
So, the question is, who is it that made the Kirin chip for Huawei? There are divergent opinions on this issue on the Internet. Although there is no exact statement at present, there are also two speculations.


The first is that Kirin 9006C is a chip previously produced by TSMC ;
There is one thing to say that the appearance of the Kirin 9006C at this time is really a bit abrupt. After all, after the Huawei 9000 chip, Huawei has not launched a new Kirin chip, and there is currently no foundry that can produce 5nm chips for Huawei.
Given that Huawei's current chip inventory is still a mystery, it is not clear how many Kirin chips Huawei has, and how many Kirin chips are in stock. Therefore, the Kirin 9006C is likely to be a chip produced by TSMC and Huawei during the cooperation.

The second argument is that Kirin 9006C is transformed from Kirin 9000 ;
This argument is not a vacancy. From the perspective of parameters, the Kirin 9006C and the Kirin 9000 chip have certain similarities.


Kirin 9006C and Kirin 9000 both use 5nm process and also have a 3.13GHz Cortex-A77 super core. Although the GPU is different, the difference is not big. The GPU of Kirin 9006C is Mali-G78 MP22, while Kirin 9000 is Mali-G78 MP24. Therefore, from the perspective of parameters, the Kirin 9006C is likely to be a modified version of the Kirin 9000.
No matter how the Kirin 9006C came about, its advent is a good thing for Huawei. It can not only enhance the competitiveness of Huawei's products, but also increase Huawei's market influence.
In recent years, the strength of Huawei's Kirin chips has never disappointed consumers, and the self-developed Kirin chips have become a competitive advantage of Huawei products in the market. According to reports from Zhongguancun Online, Kirin 9006C is a product with stronger performance and lower power consumption. Huawei's new MateBook adopts this chip, which will inevitably enhance product competitiveness.


In addition, Huawei's current situation is very difficult, especially for HiSilicon Kirin chips. As mentioned in the previous article, Huawei HiSilicon has not launched new products since Kirin 9000. In addition, the inventory of products equipped with Kirin chips is decreasing. Huawei or Said that the market influence of Huawei HiSilicon Kirin chips is gradually weakening.
Although Kirin 9006C is not a chip for smart phone products, as a member of the Kirin family, its advent will inevitably usher in a large wave of attention, thereby enhancing the competitiveness of Huawei and Huawei HiSilicon in the market.
Not only that, although Huawei HiSilicon Kirin chips are no longer in production, Huawei has not given up HiSilicon, and has not disbanded the HiSilicon team. But it should be noted that if you want to maintain the normal operation of Huawei HiSilicon, you need to invest a lot of money. After Kirin 9006C enters the market, it can increase economic income to a certain extent and reduce Huawei's pressure.

Ooh so Huawei can combine and recombine chiplets to produce the Kirin 9006C?
Fabbing 5nm at SMIC seems for now not possible if im still up to date with China semi industry.

ansy1968 said:

Zhongguancun Online reported on December 3 that Huawei's new MateBook

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? Do they mean on December 3 2022, they will release the mathebook with the new chip?