At SEMICON China 2023, Wei Shaojun, a leading scholar at Tsinghua University and vice chairman of the China Semiconductor Industry Association, shared his views on the challenges faced by Chinese semiconductor industry as the globalization of semiconductor supply chain comes to a halt.
Wei indicated that the "suppression" against the semiconductor industry will definitely halt the pace of globalization, and lead to fragmentation of global supply chain. As Chinese semiconductor industry development pursues the typical separation between design, manufacturing and packaging, the "real biggest challenge" confronting Chinese semiconductor industry, according to Wei, is to change this familiar model.
Compared to IDM-dominated countries like the US, Europe, Japan, and South Korea, China's IDMs remain small. As data gathered by DIGITIMES Research indicates, in 2022 Chinese IDMs only accounted for approximately 2% of global IDM revenues. In contrast, American IDMs accounted for approximately 42%.
Another challenge, according to Wei, is China's relatively small domestic semiconductor industry: in terms of chip manufacturing. Despite the high compound annual growth rate (CAGR) of the sector, non-Chinese companies operating in China still plays an outsized role.
From 2016 to the present, the average CAGR of Chinese semiconductor manufacturing companies owned by Chinese investors is 14.7%. However, the CAGR of non-Chinese wafer manufacturing companies from Taiwan, South Korea, and other countries is higher at 30%.
Citing data, Wei indicated that China's contract manufacturing capacity is also severely insufficient. Data from 2021 shows that the monthly production capacity for 12-inch wafers is only around 440,000 units. From the demand perspective, there is a gap of one million units as the required capacity is 1.5 million units.
Finally, Chinese semiconductor industry also faces a serious lack of innovation. Analysis of the 62 chip design companies listed on China's STAR Market reveals an average gross profit margin of only 34.2%. According to Wei , this indicates that Chinese products are still not good enough to secure a high gross profit margin.
In terms of R&D, Wei pointed to Chinese semiconductor industry's underinvestment: in 2022, the combined R&D expenditure of the 62 chip design companies listed on STAR Market is only US$2.91 billion. "In other words, if we concentrate this US$2.9 billion to develop 5nm chips, we would be able to produce approximately 10 chips," said Wei, "This level of R&D investment is far from sufficient."
Chen Nanxiang, CEO of leading Chinese memory maker YMTC, also made similar observations. In his SEMICON China 2023 speech. According to Chen, 80% of China's semiconductor market is attributed to foreign companies, and similarly, 60% of the US market is also reliant on non-US companies. "This implies that China's market not only belongs to its domestic semiconductor industry but also to the global market. The same is true for the United States," said Chen.
As many countries are targeting high-end chip manufacturing capabilities, the YMTC CEO was also concerned that there may be an oversupply of high-end chips in a few years, while low-end products may be neglected, leading to potential shortages.
