China’s semiconductor industry has been thriving since 2015 driven by the Chinese government’s supportive policy and industry fund, with the revenue expected to exceed RMB 620 billion in 2018. According to TrendForce’s latest report Breakdown Analysis of China’s Semiconductor Industry, the Chinese government will continue supporting heavily in this industry at levels of central government and local authorities. In addition to assisting weak yet significant nodes in the industry chain, the National IC Investment Fund (called the “Big Fund”) will mainly focus on three key sectors in the coming years, including memory, SiC/GaN compound semiconductor, and IC design with its application in IoT, 5G, AI, smart vehicles, etc.
The year 2014 is a turning point for China’s semiconductor industry with the government’s announcement of National IC Industry Development Outline in June and the “Big Fund” in September, points out by Jeter Teo, research director of TrendForce. The government used to offer research and development rewards, tax reduction and land subsidies, but this is the first time for the state to set investment fund and adopt market-oriented approaches like mergers and acquisitions to enhance the manufacturing capacity and international competitiveness of China’s semiconductor industry.
With the support of the “Big Fund” by far, Tsinghua Unigroup bought Spreadtrum and RDA, Jiangsu Changjiang Electronics Technology Co., Ltd (JCET) acquired STATS ChipPAC and grew to a global top 3 IC testing and packaging company, Tongfu Microelectronics Co., Ltd(TFME) launched new joint venture combining AMD’s high-volume assembly, test and packaging facilities(ATMP) . In addition, steps have been taken to increase domestic IC production. As the result, China’s semiconductor industry has made progress regarding both quality and quantity, shortening the gap between China and other foreign rivals.
The first phase of “Big Fund” invests mainly on IC manufacturing, while the second phase will have higher investment proportion on IC design
By September 2017, the first phase of the “Big Fund” has raised RMB 138.72 billion, a total investment in 55 projects, reports TrendForce. The promised funding is RMB 100.3 billion and the actual investment is RMB 65.3 billion, of which IC manufacturing accounts for the largest proportion (65%). At present, the second phase of the “Big Fund” is being raised, which is estimated to reach RMB 150-200 billion. The investment projects will also be adjusted. TrendForce forecast estimates that the proportion in IC design will increase to 20%-25 %, and the investment projects will also be expanded to potential startups.
On the other hand, China’s strategy of developing domestic semiconductor industry has witnessed a clear trend – the central government drives local development. By June 2017, the amount of local semiconductor industry investment funds has reached RMB 514.5 billion in line with the “Big Fund”, of which the largest one accounts for RMB 50 billion. In response to the central government’s strategy, local authorities have put forward special policies for the semiconductor industry, which cover funding, research and development, investment, innovation and talent, etc. This shows that local authorities not only have the determination to develop semiconductor industry, but also initiative substantial practical support.
In addition, driven by local governments’ active involvement in semiconductor industry, some cities will grow more prominent, which will also lead to changes in the China’s semiconductor industry structure in the coming years, points out TrendForce. Hefei, Xiamen and Jinjiang are expected to emerge as major industrial regions of China’s new generation of semiconductor industry.