September 03, 2020
According to the plan, China aims to achieve a semiconductor self-sufficiency rate of 70% by 2025. However, bans one after another have reminded us that we will be beaten when we are behind. In less than two years, the United States has "strangled" Chinese high-tech companies represented by Huawei, and is pressing hard on China's semiconductor industry. This makes China firmer in its determination to overcome the problems of the advanced semiconductor industry anyway. In the foreseeable long-term complex international situation, even with the world's largest semiconductor consumption and application market, we should take a clear look at our own development and shortcomings.
Status Quo and Trends of China's IC Industry
Decline in growth rate:
The latest statistics from WSTS show that the global semiconductor market was US$412.3 billion in 2019, and China’s semiconductor market has grown to 34.97% of the world’s total, making it the world’s largest and most actively traded semiconductor market. The International Strategic Development Institute of Taiwan Industrial Research Institute pointed out that from 2018 to 2019, affected by the Sino-US trade war and the slowdown in the demand for smartphones and PCs, the global semiconductor market will be affected. Mainland China is the main driving force for the growth of the global semiconductor market, but it is affected by the global market environment. Influence, so the growth has slowed down. In 2019, the output value of China's IC industry was 760.9 billion yuan, an annual growth rate of 16.1%, compared with 20.9% in 2018, and this year is expected to further decline to 14.1%.
Breakthrough in the proportion of IC design industry:
The chip design industry has become one of the most dynamic areas in the domestic semiconductor industry. In recent years, China's chip design industry has maintained a rapid growth trend driven by factors such as increased self-sufficiency, policy support, specification upgrades, and innovative applications. The data shows that the sales revenue of the chip design industry has increased from 132.5 billion yuan in 2015 to 294.77 billion yuan in 2019. It is estimated that in 2020, the market size of China's chip design industry will exceed 350 billion yuan.
In the past, the IC packaging and testing industry accounted for the highest proportion of the mainland IC industry, reaching 48% of the highest point in 2012. Since 2016, the proportion of the IC design industry (37.9% that year) surpassed the packaging and testing industry (36.1%) for the first time, and it exceeded 40% in 2019, accounting for 40.5%.
Development status of China's top ten IC design companies in 2019
According to the data of IC Insights, the top ten IC design companies in mainland China in 2019 are HiSilicon, Ziguang Group, Haowei Technology, Bitmain, ZTE Microelectronics, BGI, Nari Smart Chip, ISSI, Zhaoyi Innovation, Datang Semiconductor. Among them, only HiSilicon (22%), Howe (18%), and Beijing Zhaoyi Innovation (39%) have achieved double-digit growth. The remaining companies have different degrees of growth compared with 2018. Decline.
The shrinking of the global smartphone market in 2019 has led to the introduction of various functions such as portrait, night shooting and zoom capabilities to stimulate consumers to purchase and replace phones. Despite the impact of the epidemic and market saturation in 2020, the demand for smartphones may show negative growth, but the trend of dual-lens or triple-lens in mobile phones will continue to ferment, and the number of CIS on mobile phones will continue to increase, supporting the continued growth of the CIS industry in the future.
As the world's third largest CIS supplier, Howe CIS product revenue accounted for more than 90% of its business. Thanks to the CIS stock-out price increase since the second half of last year, Howe's revenue in 2019 also increased significantly.
Zhaoyi's innovative business layout includes three parts: memory chips (NOR Flash, NAND Flash), MCU, and sensors. The revenue in 2019 accounted for 80%, 14%, and 6% (sensors and others), respectively.
In 2019, Zhaoyi Innovatively acquired 100% equity of Silimicro, a leading supplier of capacitive touch chips and fingerprint identification chips in the mainland market, and actively promoted the integration with Silimicro. In terms of optical fingerprint sensors, it actively optimized lens-type optical fingerprint products. It also introduced optical fingerprints under the LCD screen, ultra-small package lens optical fingerprint products, ultra-thin optical fingerprint products, and large-area TFT optical fingerprint products.
Zhaoyi Innovation achieved a significant growth of 39% in revenue in 2019. On the one hand, thanks to the increase in market demand, the company continues to expand new customers and new markets, introduces new products, optimizes and adjusts product structure. In 2019, memory sales increased by approximately 717 million. In RMB, MCU revenue in 2019 increased by approximately RMB 39.2 million from 2018. In addition, the completion of the merger and acquisition of Si Liwei, the latter contributed 203 million yuan in revenue.
In terms of advanced IC design, HiSilicon and Ziguang Zhanrui are both at the forefront of the industry.
HiSilicon released the high-end application processor Kirin 990 5G in 2019. At that time, it was the world's first successfully integrated 5G baseband SoC, which was mounted on the Huawei Mate30 series. Kirin 990 uses TSMC’s 7nm EUV process. This year, HiSilicon released the second 5G chip-Kirin 820, which adopts TSMC's 7-nanometer process, mainly targeting the mid-to-high-end mobile phone market.
Ziguang Zhanrui, the second largest IC design company in mainland China, also released the latest second-generation 5G chip Huben T7520 in February this year. Mass production is expected by the end of 2020. For the 5G mid-range mobile phone market, TSMC's 6nm EUV process will be adopted.
In addition, many mobile phone brand manufacturers have invested in self-developed mobile phone chips. In addition to Huawei's use of HiSilicon’s self-developed Kirin series, Xiaomi’s Songguo Electronics released its first self-made chip, the Surging S1, in 2017. OPPO invested in self-developed mobile phone chips and announced the "Mariana" plan. For these mobile phone brands, self-developed mobile phone chips need to invest more time, funds, and technology, but success is not necessarily true, but if they succeed, they can master the key processor chip technology. Now that we have entered the 5G era, the technical threshold has been further improved, and the self-developed chips of mobile phone manufacturers have increased the test.
Compared with Huawei's HiSilicon's mature Kirin series, other mobile phone manufacturers such as OPPO and Xiaomi rely on mobile phone chips from Qualcomm and MediaTek. However, the US ban on Huawei has accelerated the mainland's determination to "de-beautify", and to some extent prompted mobile phone brand manufacturers such as OPPO to improve their core self-developed chip capabilities. For the latter, huge R&D investment, talent and technology sources, technical foundation and market acceptance will all be huge challenges.
Sixty percent of IC manufacturing comes from foreign fabs, and the storage industry is facing dangers and opportunities
Data show that in 2016, the market size of China's wafer manufacturing industry exceeded 100 billion yuan; by 2019, the market size of China's wafer manufacturing industry exceeded 200 billion yuan, reaching 214.91 billion yuan. It is estimated that in 2020, the market size of my country's wafer manufacturing industry may reach 262.35 billion yuan.
However, in 2019, more than 60% of China's IC manufacturing revenue came from foreign fabs, including SK Hynix, Samsung, Intel, and TSMC. Local IC manufacturing revenue mainly comes from SMIC and Shanghai Huali Microelectronics; memory chip manufacturing mainly comes from Yangtze River Storage and Changxin Storage. Even after Changxin Storage and Yangtze Storage start mass production, IC Insights predicts that by 2024, 50% of mainland IC manufacturing will still come from foreign fabs.
As one of the most valuable products of integrated circuits, the memory chip industry is a national strategic industry, which is directly related to the development of the electronic information industry. In order to reduce dependence on imports, the country has been investing heavily in domestic memory chips in recent years.
The planned strategic layout is that Yangtze River Storage focuses on NAND Flash, and Changxin Storage and Fujian Jinhua focus on DRAM. However, after Jinhua suffered lawsuits and sanctions against Micron, it is now close to a standstill.
YMTC successfully mass-produced 64-layer 3D NAND Flash in 2019. In April 2020, it announced the successful development of 128-layer 3D NAND Flash, but it still lags behind Samsung, Micron and other manufacturers. The industry’s advanced products currently mainly produce 92/96-layer 3D NAND Flash. Increased production of 112/128-layer 3D NAND Flash. Among the companies currently cooperating with YMTC, including high-quality partners such as Guokewei, Longsys, ADATA, Phison, Lianyun Technology, and Huirong, jointly promote the application of YMTC 64-layer TLC products.
Changxin Storage also officially mass-produced DDR4 chips in September 2019, and they have been adopted by five or six brand manufacturers including ADATA, Colorful, and Guangwei.
Although facing many tests, domestic memory chips have achieved an important breakthrough from "0" to "1", but this is just the beginning. Production capacity increase is a long-term process, and profitability is a distant goal. There is still a long way to go in order to occupy a place in the storage market. The first thing to do is to develop a competitive local storage chip industry and first of all to meet the domestic demand for storage chips.
IC packaging and testing results are remarkable, but the gap in advanced packaging is still large
IC packaging and testing can be said to be the most mature field of domestic semiconductors. At present, the global packaging and testing market, Taiwan, China, and the United States, is a three-pronged place. The mainland packaging and testing manufacturers have grown rapidly through acquisitions in recent years, with a total market share of 20.1%. The leading domestic manufacturers have entered the international first echelon.
The strong development of the packaging and testing industry has played a significant role in the expansion of the overall scale of the domestic semiconductor industry, and has provided strong support for the rapid development of domestic chip design and wafer manufacturing. In the future, with the rapid development of emerging fields such as the Internet of Things and smart terminals, the market demand for advanced packaging products will increase significantly. In 2019, the market size of my country's packaging and testing industry is close to 250 billion yuan, and it is expected to exceed 280 billion yuan in 2020.
In 2019, affected by major environmental factors such as the Sino-US trade war and the sluggish semiconductor industry, the revenue of Changjiang Electronics and Huatian declined by 4.3% and 19.6% respectively compared with 2019. Only Tongfu Microelectronics achieved a growth of 9.8%. . However, with the transfer order effect brought by domestic substitution, domestic packaging and testing manufacturers will benefit substantially. Since last year, the three major mainland packaging and testing manufacturers have actively expanded their advanced packaging production capacity, and capital expenditures have entered an upward period, indicating that the mainland packaging and testing manufacturers are optimistic about their future growth expectations and have clear signs of industry recovery.
It is worth noting that the evolution of Moore's Law has slowed down, and advanced packaging has become another path for the industry to meet the performance improvement needs of terminal products. It plays an increasingly important role in improving the performance of chip products and has become a battleground for the heroes.
With the advancement of TSMC, Intel, Samsung and other foundries and IDM manufacturers, the overweight layout of OSAT companies, and the continuous growth of market demand, the competition for advanced packaging will intensify. Can local packaging and testing companies compete in this Winning in the competition is vital to the mainland packaging and testing industry and even the entire semiconductor industry.
Policies and funds have fueled the flames and vigorously support the domestic semiconductor industry
Trade frictions and tensions between China and the United States have forced the mainland to promote the trend of localization. The mainland semiconductor companies have recently received support from many countries at the national level. .
The second phase of the big fund has started to invest in the near future. The first project is mainly the second phase of the big fund and Shanghai Guosheng Group, jointly injecting 4.5 billion yuan into Ziguang Zhanrui; in July, the SMIC Sci-tech Innovation Board issued a strategic placement of 24.261 billion yuan. The second phase of the big fund has been allocated over 3.5 billion yuan and is the largest investor.
It can be seen that compared to the first phase of the Big Fund, which focuses on semiconductor manufacturing, the second phase of investment focuses on the companies and projects that have been invested in the first phase. In addition, it will also provide support to companies in the field of semiconductor equipment and materials, focusing on supporting the development of leading companies. Promote the establishment of exclusive integrated circuit equipment industrial parks to attract semiconductor component companies at home and abroad, and through government forces, urge semiconductor manufacturing companies to increase the proportion of domestic equipment purchased, and provide process verification conditions for more domestic equipment materials, and expand Procurement scale.
Recently, the State Council has issued the "Several Policies to Promote the High-quality Development of the Integrated Circuit Industry and Software Industry in the New Era", adding a new "10-year tax exemption" policy for IC manufacturing below 28nm to encourage advanced technology manufacturing. Equipment, materials, and packaging and testing companies clearly enjoy the "two exemptions and three halves" policy, which is good for new subsidiaries or loss-making companies. Clearly exempt imported equipment, materials, parts and accessories from tariffs, and encourage manufacturers to expand production. Design companies continued to support, and the financing conditions for IC companies to go public were relaxed.
The semiconductor industry currently presents the characteristics of in-depth division of specialized labor and high concentration of subdivisions. The global semiconductor industry is currently undergoing the third industrial transfer, and the world semiconductor industry is gradually shifting to mainland China. Industrial transfer is a comprehensive result of market demand, national industrial policy and capital drive. The two successful industrial transfers in history have led to changes in the direction of industrial development, vertical division of labor, and reallocation of resources, and gave chasers the opportunity to enter the market, thereby promoting the innovation and development of the entire industry.
Epidemics, bans, cut-offs, weak markets...These crises are currently, we should put aside our blind arrogance or retreat. It should be more clearly realized that although the mainland accounts for more than 30% of the global semiconductor market, the rate of local chip production has not exceeded 20%.
The International Institute of Obstetrics, Industrial Research Institute of Taiwan pointed out that as IC design and packaging and testing gradually mature and stable, the next step is to move towards IC manufacturing, including foundry and memory chips.
Secondly, in addition to local IC design leaders such as HiSilicon and Ziguang Zhanrui, mobile phone brands also want to launch their own self-developed chips, and want to control key technologies in their own hands. However, key technologies and funds are huge challenges. In the 5G era, the technical threshold is higher and talents are scarce.
Finally, despite waves of increasingly severe suppression from the United States, the government is still firmly increasing its support to the industry. Although the goal of increasing the self-sufficiency rate of chips has slowed down, we must firmly believe that these setbacks are the slightest. Will not reduce our determination to develop semiconductor autonomy.