China ris­ing in semi­con­duc­tor in­dus­try

Global Times - - Business - By Ning Nan­shan

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.

Illustration: Peter C. Espina/GT

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