Expectations for China's semiconductor industry during the 12th Five Year Plan

During the 10th and 11th Five Year Plan (FYP) periods from 2001-2010, the China's government listed the semiconductor industry as one of the key industries to be supported.

Spurred on by State Council Rule 18 (2000), major China-based foundry firms such as SMIC, Hejian, Grace, and TSMC's Songjiang operations were founded during the 10th FYP period and began to rapidly expand capacity. The result was that output value for China's merchant foundry industry grew from CNY3.6 billion in 2001 to CNY22.1 billion in 2010, representing an annual compound growth rate of 21%. With this, China's IC manufacturing firms truly took off and entered a period of growth.

While the output value of China's semiconductor industry grew significantly during the 10th and 11th FYP periods, the industry's overall level of competitiveness remained weak. During the 12th FYP period from 2011-2015, China's semiconductor industry policy will shift the emphasis for development away from the pursuit of capacity and output value growth, towards a focus on improving R&D capabilities for advanced technology and advanced capacity. The government's earlier method of pouring funds directly into the industry will also be replaced by an emphasis on strengthening the operations of market mechanisms, in order to foster a group of semiconductor firms with global market share and the capacity for technological innovation.

China's policies on semiconductor development during the 12th FYP period include the Outline of the 12th Five Year Plan for National Economic and Social Development, State Council Rule 32 (2010), the six major measures to develop the software and semiconductor industries, and State Council Rule 4 (2011).

Besides affirming the semiconductor industry as one link in efforts to build infrastructure for next generation IT within the strategy for seven new major strategic industries, these plans also confirmed that semiconductor firms that met the appropriate conditions would be eligible to receive government support; moreover, the government would work to strengthen the industry's capacity for independent technological innovation through a raft of measures to reform tax incentive policy, as well as to improve the function of financial markets.

This report also provides forecasts and analysis regarding the prospects for merchant foundry firms such as SMIC, Huahong NEC, Grace, Huali Microelectronics (HLMC), Jiangsu Changjiang (JCET), Nantong Fujitsu Microelectronics (NFME), Spreadtrum and HiSense, as well as for leading package testing and IC design firms, during the 12th FYP period.

The report concludes with projections and analyses on the prospects for the IC manufacturing and IC design industries in China under the influence of the new semiconductor industry polices of the 12th FYP during the 2011-2015 period.