China rising in semiconductor industry
In terms of the semiconductor industry, the US is super-strong, South Korea has advantages in storage and Europe has three first-class semiconductor companies – NXP, Infineon and STMicroelectronics. NXP is now in talks with Qualcomm, and if these are successful, there may soon be only two big semiconductor companies in Europe.
Japan has three first-class semiconductor companies: Renesas Electronics, Sony’s CMOS chips and Toshiba Semiconductor. Sony’s CMOS chips are doing well. They have a large market share and bring a lot of profits for the company. But Toshiba has long been struggling and is looking for a buyer for its semiconductor business.
Taiwan used to be a strong player in the sector but is now facing difficulties. The Taiwan Semiconductor Association estimated that compared to 2016, the overall output value of Taiwan’s semiconductor industry in 2017 will grow by only 1 percent, while the output value of the global semiconductor market in 2017 is expected to grow by 9.8 percent compared to 2016.
In terms of output value from the semiconductor industry, the sector in Taiwan earned NT$114.4 billion ($3.8 billion) in the first half of 2017, compared to an equivalent of about NT$990 billion for the Chinese mainland. The overall development speed of the Chinese mainland in terms of the semiconductor industry has been significantly faster than in Taiwan recently.
According to statistics from the China Semiconductor Industry Association, China’s IC (integrated circuit) industry sales in January to June 2017 increased by 19.1 percent. What about Taiwan? In the second quarter of 2017, there was a 4.8 percent decline.
Design, manufacturing, packaging and testing are the four major parts of the semiconductor business. As for design, packaging and testing, the Chinese mainland has caught up with Taiwan, so Taiwan’s only advantage is in manufacturing. Taiwan’s GDP in 2016 was about $560 billion, and semiconductor giant TSMC contributed $10 billion in net profit to that figure. In addition, TSMC also provides tens of thousands of jobs and a large amount of tax revenue.
It is no exaggeration to say that the semiconductor manufacturing industry is the cornerstone of Taiwan’s economy. Taiwan has three semiconductor companies in the global top 20. Two are engaged mainly in manufacturing (TSMC and UMC), and the other specializes in design (MediaTek).
The output value of IC design in Taiwan in the first half of 2017 was NT$20.94 billion, while in the Chinese mainland it was the equivalent of NT$373.5 billion, indicating that Taiwan has been surpassed in the IC design industry. Having been behind Taiwan to now surpassing it, the Chinese mainland is now chasing Japan, South Korea and Europe. In the first half of 2017, China’s chip design industry grew by 21.1 percent, with sales of 83.01 billion yuan ($12.5 billion), continuing to maintain the world’s fastest growth rate in the sector. In the area of State-owned enterprises, there are numerous companies, such as Datang Microelectronics and Welltec, that have the ability to ensure national security. For instance, on September 16, 2017, Welltec released the Beidou navigation positioning chip, which will inspire growth of a new industry in the future. However, in Europe, Japan and Taiwan, the situation is less promising and Taiwan is facing the biggest challenge. Europe and Japan have booming automotive and electronics industries to compensate for the decline in consumer electronics, but Taiwan is not as lucky. As the market share of Chinese mainland self-produced chips keeps growing, and as Taiwan has no other industry of comparable strength to support its economy, it may have to seek greater cooperation with the mainland to make ends meet.