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Foreign firms beat local IC production in China

Posted: 29 Jul 2013     Print Version  Bookmark and Share

Keywords:IC Insights  IC production  SK Hynix  TSMC  Intel 

IC Insights has released the details of its report focused on the IC market (i.e., consumption) in China and IC production within the country. Although China has been the largest individual market for ICs since 2005, it's production represented only 11.1 per cent of its Rs.4.40 lakh crore ($81 billion) IC market in 2012. The market research company likewise predicted that this share will increase only about three percentage points to 14.4 per cent in 2017.

China-based IC production is forecast to exhibit a very strong 2012-2017 CAGR of 17.6 per cent. However, considering that China-based IC production was only about Rs.48,369.57 crore ($8.9 billion) in 2012, this growth will come off a relatively small base. In 2012, SK Hynix, TSMC and Intel were the major foreign IC manufacturers that had significant IC production in China. In fact, SK Hynix' China fab had the most capacity of any of its fabs last year. In 2012, Intel continued to ramp-up its 300mm fab in Dalian, China (it started production in late October 2010), which is expected to give a noticeable boost to the China-based IC production figures over the next few years. This fab currently has an installed capacity of 30,000 300mm wafers per month with a maximum capacity of 52,000 wafers per month.

In early 2012, Samsung gained approval from the South Korean government to construct a 300mm IC fabrication facility to produce NAND flash memory in Xian, China. Samsung started construction of the fab in September of 2012 with production set to begin in 1H14. The company expects to invest Rs.12,500.00 crore ($2.3 billion) in the first phase of the fab with Rs.38,043.48 crore ($7 billion) budgeted in total. This facility is targeting NAND flash production using a 10-19nm feature size process technology.

If China-based IC production rises to Rs.1.09 lakh crore ($20 billion) in 2017 as forecast, it would still represent only 5.6 per cent of the total forecasted 2017 worldwide IC market of Rs.19.52 lakh crore ($359.1 billion). Even after adding a significant "markup" to many of the Chinese producers' IC sales figures (since many of the Chinese IC producers are foundries that sell their ICs to companies that re-sell these products to the electronic system producers), China-based IC production would still represent less than 10 per cent of the global IC market in 2017.

Historically, the lack of consistent IP protection has been a major deterrent for foreign firms seeking to establish modern IC fabrication facilities in China. The lack of IP protection is also a reason many large fabless IC suppliers (e.g., Qualcomm, Broadcom, etc.) have not brought leading-edge IC designs into China for the indigenous Chinese IC foundries to manufacture. It should also be noted that, thus far, Chinese IC foundries have also been unable to offer large amounts of IC production using leading-edge feature sizes.

IC Insights noted that the future size of the IC production base in China is more dependent upon whether foreign companies continue to locate, or re-locate, IC fabrication facilities in China than on the success of indigenous Chinese IC producers (e.g., SMIC, Hua Hong Grace, etc.). As a result, IC Insights forecasts that at least 70 per cent of IC production in China in 2017 will come from foreign companies such as SK Hynix, TSMC, Intel and Samsung.

For more statistics and forecasts, click here.

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