Calls for domestic substitution in the Chinese Chip Industry are rising. What's the status of its engagement in the global supply chain?
In the book "Chip War," it is written, "In the age of AI, it's often said that data is the new oil. Yet the linitation we face is not the availability of data, but of processing power... Unlike oil, which can be bought from many countries, our production of computational power is much more complex."
Semiconductors refer to materials whose conductivity at room temperature lies between that of conductors and insulators. They are extensively used in a variety of electronic products. The World Semiconductor Trade Statistics (WSTS) categorizes semiconductors into four main types: integrated circuits, discrete devices, optoelectronic devices, and sensors. As integrated circuits account for over 80% of semiconductor products, in everyday parlance, the terms "semiconductor," "integrated circuit," and "chip" are often used interchangeably to refer to the integrated circuit devices commonly found in consumer electronics.
The importance of semiconductors is self-evident. Their development has been deeply influenced by the economic growth and international relations since World War II. Due to their wide application in both commercial and military fields, in the midst of the new wave of artificial intelligence and the U.S.-China rivalry, policies surrounding the semiconductor industry profoundly impact everything from downstream industries to international relations, becoming an integral facet of national power. In global semiconductor import and export policy changes, the call for "domestic substitution" in the mainland Chinese semiconductor sector is growing louder. Many companies have not only achieved milestones in domestic substitution but are also deeply involved in the international division of labor within the semiconductor industry. Presently, the operational models in the semiconductor sector mainly comprise of IDM, Fabless, and Foundry. In this article, EqualOcean will review and anaylse the enterprises within the global semiconductor industry chain located in mainland China.
In the realm of the IDM, which amalgamates various stages of the semiconductor supply chain – from chip design, fabrication, to packaging and testing – it was predominantly embraced by early integrated circuit businesses. However, presently, only a handful of companies can sustain this model. Public data indicates that Mainland Chinese companies don't hold a commanding position in the global IDM landscape, with their absolute numbers being comparatively sparse.
Established in 1993, WINGTECH Technology stands as a global frontrunner, orchestrating a symphony of research, design, and production across product integration, fundamental semiconductors, and optics. Its chief business engagements span a spectrum, including the R&D and manufacturing of smartphones, tablets, laptops, servers, IoT, automotive electronics, and more; semiconductor power devices, analog chip R&D design, wafer fabrication, packaging, and testing; along with optical module research and manufacturing services. One of its subsidiaries, Ampleon Semiconductor, a renowned global IDM (Vertically Integrated Manufacturer), consolidates the entirety of the chip design, wafer manufacturing, and packaging-testing continuum. It traces its lineage back to the erstwhile Philips Semiconductor Standard Products division, boasting over six decades of semiconductor research and manufacturing prowess.
YANGTZE MEMORY （长江存储）
Founded in July 2016, YANGTZE MEMORY is a quintessential IDM integrated circuit firm, specializing in 3D NAND flash memory design and manufacturing while offering comprehensive memory solutions. Predominantly, they supply 3D NAND flash wafers and granules, embedded storage chips, and an array of products and solutions like consumer and enterprise SSDs, which find applications in mobile communications, consumer electronics, computing, servers, and data centers. As per their official records, in October 2017, YANGTZE MEMORY, leveraging a blend of indigenous R&D and international collaborations, successfully crafted China's inaugural 3D NAND flash memory. As of 2022, their domestic market share in NAND flash memory stands at approximately 5%.
Hangzhou Silan Microelectronics Co., Ltd., primarily engaged in integrated circuit chip design and semiconductor microelectronics production, was established in September 1997, with its headquarters gracing Hangzhou and an R&D center strategically positioned in Silicon Valley. March 2003 saw Silan Microelectronics debuting on the Shanghai Stock Exchange, the pioneer integrated circuit chip design entity to be publicly traded within China. It ranks among China's preeminent IDM firms, melding chip design and manufacturing, with its technological prowess, business scale, profitability, and other key indices being laudably recognized within the domestic industry.
CXMT, an integrated memory manufacturing corporation established in 2016, anchors its operations in Hefei, Anhui. They primarily engage in the design, R&D, production, and sales of Dynamic Random Access Memory chips (DRAM). With an expansive global footprint of R&D centers and branches, they have unveiled a variety of DRAM commercial products, ubiquitously utilized across mobile devices, computers, servers, virtual reality, and IoT.
BYD Semiconductor Co., Ltd., colloquially known as BYDMicro, is a domestic vanguard in the realm of efficient, intelligent, and integrated next-gen semiconductor firms. Their core pursuits encompass power semiconductors, intelligent control ICs, smart sensors, optoelectronic semiconductors, manufacturing, and services. Encompassing sensing, processing, and controlling of light, electricity, and magnetic signals, their product suite promises an expansive market application horizon. With automotive-grade semiconductors at their core, their offerings encompass the pivotal applications of new energy vehicles and find extensive utilization in sectors like industry, home appliances, new energy, and consumer electronics.
Yangjie Electronic Technology（扬杰科技）
Yangjie Electronic Technology epitomizes a vertically integrated (IDM) semiconductor manufacturer, encompassing semiconductor discrete device chip design and manufacturing, device packaging and testing, and end-sale services. Their product suite spans discrete device chips, MOSFETs, IGBT & power modules, SiC, rectifying devices, protective devices, and small signals, bolstered by comprehensive product solutions. These offerings are extensively leveraged across automotive electronics, new energy, industrial controls, power supplies, home appliances, lighting, security, networking, and consumer electronics. Media outlets reported that in 2023, Yangjie Electronics made a foray into the European securities market by issuing GDRs. The proceeds from this venture are earmarked to galvanize Yangjie Electronic Technology's global business expansion, international strategizing, and R&D investment, aiming to further penetrate international markets.
Companies operating under the Fabless model are responsible for the circuit design and sales of chips. The intermediary processes such as production, testing, and packaging are typically outsourced. This operational model has a modest startup scale and is relatively easy to establish. Consequently, most semiconductor enterprises in Mainland China adopt the Fabless operation model.
GigaDevice Semiconductor Inc. is a globally leading Fabless chip supplier founded in April 2005, headquartered in Beijing, China. They have branches and offices in Shanghai, Shenzhen, Hefei, Xi'an, Chengdu, Suzhou, and Hong Kong within China, as well as the USA, South Korea, Japan, the UK, Germany, and Singapore. According to their official website, GigaDevice presently ranks third globally and first in China in the NOR Flash market segment.
ESPRESSIF is a global fabless semiconductor firm founded in 2008. They have offices in China, the Czech Republic, India, Singapore, and Brazil, with a diverse team originating from approximately 30 countries and regions. ESPRESSIF primarily delves into the R&D and design of AIoT hardware and software products, focusing on the development of highly integrated, low-power wireless communication SoCs. In July 2019, ESPRESSIF was listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange.
Founded in December 2004 by a technical team from Silicon Valley, BEKEN focuses on the intelligent transportation and smart home application domains. It stands out as a listed company in China specializing in the design of IoT wireless connection chips. With its internationally leading RF-CMOS integrated circuit design capabilities combined with advanced digital signal processing technologies, the company develops integrated RF transceivers and related SoC products. They provide comprehensive wireless communication solutions for applications including intelligent transportation and the Internet of Things. Official data reveals that BEKEN has subsidiaries and tech divisions in Shenzhen, Beijing, Hangzhou, Qingdao, Hong Kong, and Athens.
SGMICRO is dedicated to the R&D and sales of high-performance, high-quality analog integrated circuits. They offer innovative solutions for a wide range of applications in industries such as automotive, communication, consumer, and medical markets. They are the first A-share listed company specializing in analog chips and the only company to have been consistently ranked among the "Top Ten Chinese IC Design Companies" since 2008. Their official website indicates that industrial control, automotive electronics, communication equipment, and medical electronics contribute to approximately 53% of their revenue.
Established in 2015, WeEn Semiconductors operates from its hub in Shanghai, with wholly-owned subsidiaries and branches including a chip production base in Jilin, a subsidiary in Hong Kong, product and R&D centers in Shanghai and the UK, a logistics center in Dongguan, and sales and customer service points spread globally. WeEn's product line primarily includes silicon carbide devices, thyristor rectifiers, triacs, fast recovery diodes, TVS, ESD, IGBT, modules, etc., extensively employed in sectors representing consumer electronics, industrial manufacturing epitomized by communication power, new energy, and automotive realms.
Under the Foundry busniess model, companies solely undertake manufacturing, packaging, or testing, without engaging in chip sales. Such entities are often referred to as contract manufacturers, with Taiwan's TSMC being a prominent example. Mainland China's foundries have seen advancements in recent years, birthing top-ten-ranked foundries, yet still trail in technology compared to other regions.
SMIC, or Semiconductor Manufacturing International Corporation, is a leading entity in Mainland China's integrated circuit manufacturing industry and one of the global frontrunners in IC wafer foundry services. Headquartered in Shanghai, SMIC provides a comprehensive portfolio of integrated circuit wafer manufacturing services with technology spanning from 0.35 micron to FinFET. SMIC has three 8-inch wafer fabs and four 12-inch wafer fabs in Shanghai, Beijing, Tianjin, and Shenzhen; with new 12-inch fabs under construction in Shanghai, Beijing, and Tianjin. They've established marketing and customer service offices in the U.S., Europe, Japan, and Taiwan and have a representative office in Hong Kong.
Nexchip, established in May 2015, is a joint venture between Hefei City Construction Investment Holdings (Group) Co., Ltd. and Taiwan's Powerchip Technology Corp. It is Anhui Province's inaugural 12-inch wafer foundry, specializing in manufacturing chips for various applications such as display panel drivers, microcontrollers (MCU), CMOS image sensors (CIS), power management ICs (PMIC), and AIoT. As of 2022, Nexchip achieved an annual revenue exceeding 10 billion yuan, securing its goal as the global leader in LCD panel driver chip manufacturing, and emerging as Mainland China's third-largest wafer foundry.
From the current distribution of enterprises, it can be observed that although the Chinese mainland constitutes a significant consumer market for semiconductors globally, its deep involvement in the semiconductor industry chain is relatively weak.
IDM enterprises on the Chinese mainland are comparatively deficient in both technological prowess and market share. None of the top ten IDM companies worldwide, according to various rankings, originate from Chinese mainland enterprises. However, these top ten companies hold a substantial market share, accounting for around 75% of the global semiconductor market, as indicated by data released by the Semiconductor Equipment and Materials International (SEMI) in 2021. Prominent companies like Intel, Samsung Electronics, and TSMC (Taiwan Semiconductor Manufacturing Company) dominate this field. On the contrary, the market share of Chinese mainland IDM enterprises remains below 5%. This highlights China's relatively modest presence in the IDM sector. While certain companies have made progress in specific domains, a considerable gap persists when compared to internationally leading IDM corporations.
Chinese mainland enterprises operating under the Fabless model have achieved some level of success in the international market. Their numbers have grown significantly, surpassing 3000 companies, according to data from the China Semiconductor Industry Association. These enterprises have accumulated advantages through government support, market demand, and technological innovation. However, their overall share in the global market remains comparatively low. IC Insights data reveals that the top ten global Fabless enterprises account for over 80% of the global Fabless market revenue, with none of these top players originating from the Chinese mainland. China is indeed one of the largest global semiconductor consumer markets, with increasing demand for high-performance chips in fields like 5G, artificial intelligence, and the Internet of Things, offering substantial market opportunities for local Fabless enterprises. Nevertheless, due to susceptibility to upstream and downstream fluctuations and the low barrier to entry due to light assets, these enterprises face intense competitive pressures.
Foundry factories have managed to attain some competitive advantages. As previously mentioned, a few Chinese mainland enterprises have emerged among the top ten wafer foundry companies. Cost advantages and production capacity serve as strengths for Chinese mainland Foundry enterprises, which can offer relatively inexpensive manufacturing services to international clients. However, these companies also encounter challenges related to technological prowess and equipment investment. Technological advancement is essential for handling increased demand for foundry services. Presently, the Taiwan region holds an absolute advantage in terms of technological prowess due to its extensive history and strong competitiveness in the foundry sector.
While the Chinese mainland has made strides in the semiconductor field, challenges regarding market share and technological prowess persist in the IDM and Fabless sectors. In the Foundry domain, Chinese mainland enterprises are gradually catching up, yet technological enhancement remains a pivotal factor. Government support, market demand, and technological innovation provide developmental opportunities for the Chinese mainland's semiconductor industry. However, achieving a stronger position within the global semiconductor industry chain necessitates continuous reinforcement of independent innovation and technological advancement.