China needs to re-understand the globalization of the semiconductor industry and maintain the integrity of the global supply chain
Tsinghua University Professor Wei Shaojun: China needs to re-understand the globalization of the semiconductor industry and maintain the integrity of the global supply chain
On June 17, the 2nd China-Nansha International IC Industry Forum (2023 IC NANSHA), organized by Core Research, opened in Nansha, Guangzhou. The Daily Economic News reporter learned that Wei Shaojun, a professor at Tsinghua University's School of Integrated Circuits, attended the forum and delivered a keynote speech on "Re-globalization of the Semiconductor Industry".
Wei Shaojun mentioned that the reverse globalization trend, the current Chinese semiconductor industry is facing more serious challenges. He pointed out that over the past decade or so, we thought that China's chip manufacturing was growing fast, but in fact this growth was largely contributed by foreign companies in China. Wei Shaojun also stressed that China's IC industry should move forward with determination, and that China's position as a mega chip market will not change in the near future. China has to re-understand the globalisation of the semiconductor industry, maintain the integrity of the global supply chain of semiconductors and achieve re-globalisation.
Confessing to the lack of efficiency of listed IC companies
Wei Shaojun began by talking about the current state of the global semiconductor industry. He said that the globalisation process of the semiconductor industry is currently being interrupted. This year, first the Netherlands banned the sale of photolithography machines to China, and then the Japanese government introduced export control measures for 23 kinds of semiconductor manufacturing equipment. China's semiconductor industry, which is based on globalisation, is facing challenges.
Wei Shaojun said that the sales revenue of domestically produced integrated circuits has continued to increase over the past 10 years. While acknowledging the industry's progress, he rationalised that, in value terms, the proportion of domestic chips in the domestic market demand has increased from 13.% in 2013 to 41.4% in 2022, which is still far from the domestic market demand.
He also provided a set of data, saying that the compound annual growth rate of domestic semiconductor manufacturing companies has reached 14.7 so far in 2016; however, foreign companies are growing even faster, with a compound annual growth rate of 30 per cent. Foreign-funded semiconductor manufacturing companies have contributed twice as much to the growth of China's semiconductor manufacturing industry as domestic companies. "Our (semiconductor) manufacturing industry still needs a lot of external support. On the other hand, from a Chinese perspective, we still have a lot of potential for development."
The Daily Economic News reporter noted that Wei Shaojun also conducted financial statistics on 135 semiconductor (full industry chain) companies listed on the Science and Technology Board and the Growth Enterprise Market. The results show that as of April 30, 2023, the total market capitalization of these 135 companies is 308.25 billion yuan, which is not yet half the market capitalization of Nvidia. At the same time, the 135 enterprises achieved a cumulative revenue of RMB282.19 billion in 2022, with an average gross profit margin of 39.1%, which is low.
In addition he also counted 62 chip design companies on the KCI board and their average gross margin in 2022 was 34.2 per cent, 27.8 percentage points lower than the 62 per cent of US semiconductor companies; but their average R&D expense ratio was 20.8 per cent, 3.8 percentage points higher than that of US semiconductor companies. "That's good. But if you just look at total R&D spending, these 62 KSC chip companies are spending about $2.91 billion on R&D."
How do we re-globalise the semiconductor industry?
Wei Shaojun said that the process technology of Chinese semiconductor manufacturing companies is currently mainly at 14nm, while domestic foundry capacity is severely lacking. By the end of 2021, the existing 12-inch wafer foundry capacity of Chinese semiconductor companies totalled about 440,000 wafers. This is a huge gap compared to the current demand for 1.5 million wafers of capacity per month in China's IC design industry.
While there are challenges to the development of China's semiconductor industry, it cannot afford not to move forward. In Wei Shaojun's view, China's mega-chip market position will not change in the short term. There will be a rebalancing of China's and the world's dependence, but the general trend will not change.
So, how to promote the semiconductor industry to achieve re-globalisation? Wei Shaojun proposed that, specifically, China's IC industry should build on its strengths and avoid its weaknesses to grasp the initiative of development, for example, China has a leading edge in 5G chips; secondly, China should insist on expanding its openness and invite friends widely. It is necessary to re-understand the globalization of the semiconductor industry, maintain the integrity of the global supply chain of semiconductors and achieve re-globalization. "If the formation of the semiconductor global supply chain in the first 20 years was characterised by the division of labour as the main feature. Then re-globalisation must put more emphasis on cooperation, you in me, me in you, and common development." So said Wei Shaojun. He stressed the need to make good use of China's mega market, so that partners in the global supply chain of semiconductors can profit together.
Finally, China's ICs should also grasp the new opportunities of new energy vehicle chips and artificial intelligence chips to expand new space. "Artificial intelligence is a 'feast' that cannot be missed. The development of high-calculus, low-energy or energy-efficient AI servers/chips has become inevitable, and this is the direction of development." Wei Shaojun said.
On June 17, the 2nd China-Nansha International IC Industry Forum (2023 IC NANSHA), organized by Core Research, opened in Nansha, Guangzhou. The Daily Economic News reporter learned that Wei Shaojun, a professor at Tsinghua University's School of Integrated Circuits, attended the forum and delivered a keynote speech on "Re-globalization of the Semiconductor Industry".
Wei Shaojun mentioned that the reverse globalization trend, the current Chinese semiconductor industry is facing more serious challenges. He pointed out that over the past decade or so, we thought that China's chip manufacturing was growing fast, but in fact this growth was largely contributed by foreign companies in China. Wei Shaojun also stressed that China's IC industry should move forward with determination, and that China's position as a mega chip market will not change in the near future. China has to re-understand the globalisation of the semiconductor industry, maintain the integrity of the global supply chain of semiconductors and achieve re-globalisation.
Confessing to the lack of efficiency of listed IC companies
Wei Shaojun began by talking about the current state of the global semiconductor industry. He said that the globalisation process of the semiconductor industry is currently being interrupted. This year, first the Netherlands banned the sale of photolithography machines to China, and then the Japanese government introduced export control measures for 23 kinds of semiconductor manufacturing equipment. China's semiconductor industry, which is based on globalisation, is facing challenges.
Wei Shaojun said that the sales revenue of domestically produced integrated circuits has continued to increase over the past 10 years. While acknowledging the industry's progress, he rationalised that, in value terms, the proportion of domestic chips in the domestic market demand has increased from 13.% in 2013 to 41.4% in 2022, which is still far from the domestic market demand.
He also provided a set of data, saying that the compound annual growth rate of domestic semiconductor manufacturing companies has reached 14.7 so far in 2016; however, foreign companies are growing even faster, with a compound annual growth rate of 30 per cent. Foreign-funded semiconductor manufacturing companies have contributed twice as much to the growth of China's semiconductor manufacturing industry as domestic companies. "Our (semiconductor) manufacturing industry still needs a lot of external support. On the other hand, from a Chinese perspective, we still have a lot of potential for development."
The Daily Economic News reporter noted that Wei Shaojun also conducted financial statistics on 135 semiconductor (full industry chain) companies listed on the Science and Technology Board and the Growth Enterprise Market. The results show that as of April 30, 2023, the total market capitalization of these 135 companies is 308.25 billion yuan, which is not yet half the market capitalization of Nvidia. At the same time, the 135 enterprises achieved a cumulative revenue of RMB282.19 billion in 2022, with an average gross profit margin of 39.1%, which is low.
In addition he also counted 62 chip design companies on the KCI board and their average gross margin in 2022 was 34.2 per cent, 27.8 percentage points lower than the 62 per cent of US semiconductor companies; but their average R&D expense ratio was 20.8 per cent, 3.8 percentage points higher than that of US semiconductor companies. "That's good. But if you just look at total R&D spending, these 62 KSC chip companies are spending about $2.91 billion on R&D."
How do we re-globalise the semiconductor industry?
Wei Shaojun said that the process technology of Chinese semiconductor manufacturing companies is currently mainly at 14nm, while domestic foundry capacity is severely lacking. By the end of 2021, the existing 12-inch wafer foundry capacity of Chinese semiconductor companies totalled about 440,000 wafers. This is a huge gap compared to the current demand for 1.5 million wafers of capacity per month in China's IC design industry.
While there are challenges to the development of China's semiconductor industry, it cannot afford not to move forward. In Wei Shaojun's view, China's mega-chip market position will not change in the short term. There will be a rebalancing of China's and the world's dependence, but the general trend will not change.
So, how to promote the semiconductor industry to achieve re-globalisation? Wei Shaojun proposed that, specifically, China's IC industry should build on its strengths and avoid its weaknesses to grasp the initiative of development, for example, China has a leading edge in 5G chips; secondly, China should insist on expanding its openness and invite friends widely. It is necessary to re-understand the globalization of the semiconductor industry, maintain the integrity of the global supply chain of semiconductors and achieve re-globalization. "If the formation of the semiconductor global supply chain in the first 20 years was characterised by the division of labour as the main feature. Then re-globalisation must put more emphasis on cooperation, you in me, me in you, and common development." So said Wei Shaojun. He stressed the need to make good use of China's mega market, so that partners in the global supply chain of semiconductors can profit together.
Finally, China's ICs should also grasp the new opportunities of new energy vehicle chips and artificial intelligence chips to expand new space. "Artificial intelligence is a 'feast' that cannot be missed. The development of high-calculus, low-energy or energy-efficient AI servers/chips has become inevitable, and this is the direction of development." Wei Shaojun said.
