Han Xiaomin

Global Times - - BIZOVE - By Zhang Hong­pei

China has be­come the world’s largest semi­con­duc­tor equip­ment mar­ket thanks to con­tin­u­ous, in­ten­sive in­vest­ment in the sec­tor.

Al­though the do­mes­tic semi­con­duc­tor equip­ment mar­ket is fore­cast to main­tain rapid growth in the next two or three years, the in­vest­ment model should be­come ra­tio­nal, as money needs to be com­bined more with tech­nol­ogy ac­cu­mu­la­tion and ta­lent cul­ti­va­tion, an­a­lysts warned.

The global semi­con­duc­tor in­dus­try as­so­ci­a­tion SEMI said in a re­port that South Korea, which topped the rank­ing for six quar­ters, yielded to China. Semi­con­duc­tor equip­ment ship­ment in South Korea stood at $3.45 bil­lion in the third quar­ter, down 31 per­cent year-on-year, the first drop since the first quar­ter of 2016, ac­cord­ing to the SEMI.

Mean­while, China be­came the largest semi­con­duc­tor equip­ment buyer with billings of $3.98 bil­lion, up 106 per­cent.

In the third quar­ter of 2017, the fig­ure was just $1.93 bil­lion, about 40 per­cent of the South Korean to­tal.

The SEMI es­ti­mates that equip­ment sales in China will surge 46.6 per­cent to $17.3 bil­lion in 2019.

“China’s first rank­ing is more re­lated to South Korea’s slower pace of in­crease than the con­tin­u­ous equip­ment in­vest­ment in China,” Han Xiaomin, gen­eral man­ager of CCID Con­sult­ing’s in­te­grated cir­cuit busi­ness, told the Global Times on Thurs­day.

Given slug­gish de­mand in over­seas mar­kets that has per­sisted since last year, some in­ter­na­tional semi­con­duc­tor gi­ants have been cut­ting their in­vest­ment in equip­ment. They may be seek­ing changes in their tech­nol­ogy di­rec­tion as well, Han said.

In com­par­i­son, the Chi­nese mar­ket has ex­pe­ri­enced boom­ing devel­op­ment with ramped-up ef­forts from the gov­ern­ment and com­pa­nies to grow the chip sec­tor.

In 2014, Bei­jing es­tab­lished the China In­te­grated Cir­cuit In­dus­try In­vest­ment Fund, also known as the “Big Fund,” with sup­port from the Min­istry of Fi­nance and other en­ti­ties. The fund’s aim is to help build a com­pet­i­tive chip ecosys­tem for China so that the coun­try can cut its heavy re­liance on for­eign sup­pli­ers.

The first-phase fund com­pleted in­vest­ment of 138.7 bil­lion yuan ($20.12 bil­lion) in to­tal in May, me­dia re­ports said.

Mean­while, more Chi­nese com­pa­nies have been show­ing an in­ter­est in the IC sec­tor, es­pe­cially this year. For ex­am­ple, e-com­merce com­pany Alibaba Group Hold­ing un­veiled in Septem­ber an am­bi­tious plan to de­velop a pro­pri­etary ar­ti­fi­cial in­tel­li­gence (AI) chipset, and it said it will es­tab­lish a semi­con­duc­tor com­pany, named Ping­touge, to meet this goal.

Semi­con­duc­tor equip­ment plays a vi­tal role in the man­u­fac­tur­ing of ICs, stand­ing at the up­stream of the semi­con­duc­tor in­dus­trial chain. “About 70 per­cent of in­vest­ment in the in­dus­try goes into equip­ment, which is used to man­u­fac­ture and test chips,” Han said.

Wang Yan­hui, head of the Shang­hai-based Mo­bile China Al­liance, told the Global Times on Thurs­day that semi­con­duc­tor equip­ment, which re­quires ad­vanced tech­nol­ogy and long-term re­search and devel­op­ment as well as skilled tech­ni­cians, is not where China has ab­so­lute ad­van­tages. Thus most of this equip­ment is im­ported, even though in some niche mar­kets, do­mes­ti­cally pro­duced equip­ment can equal or even sur­pass im­ported items.

“Tra­di­tional pow­er­houses such as the US, the Nether­lands and Ja­pan still dom­i­nate the up­stream of the semi­con­duc­tor in­dus­trial chain, while China’s ad­van­tages clus­ter in chip man­u­fac­tur­ing, which is at the down­stream of the chain,” said Wang.

An­a­lysts said that in­dus­try logic dic­tates a re­liance on a con­nected global mar­ket and in­ter­na­tional divi­sion of la­bor.

“You can­not ex­pect one na­tion to han­dle the whole in­dus­trial chain,” Wang noted.

He added that as China is con­stantly in­vest­ing in equip­ment, it must keep an eye on the con­nec­tion of that in­vest­ment with tech­no­log­i­cal im­prove­ment and ta­lent train­ing.

“China’s IC in­dus­try can fol­low the smart­phone devel­op­ment path –

from knock-offs to core tech­nol­ogy devel­op­ment and own-brand prod­ucts,” he added.

Gen­eral man­ager of CCID Con­sult­ing’s in­te­grated cir­cuit busi­ness

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