Monday, May 25, 2020
* IC production in China, including output by both foreign and domestic players, only accounted for 15.7 per cent of its US$125 billion chip market in 2019
* Companies with headquarters in China accounted for just 6.1 per cent of China’s total IC market last year, which includes imports.
At its current pace China will only achieve one third of its 70 per cent self-sufficiency goal for semiconductor production as laid out in Beijing’s controversial Made in China 2025 initiative, according to US market research firm IC Insights.
In a new report, the Arizona-based firm said that while the demand for integrated circuits (ICs) in China is growing rapidly, chip production in the country is struggling to keep up. The report said while Beijing’s goal is to reach 70 per cent self-sufficiency by 2025, China is only likely to reach one-third of that target.
The Made in China 2025 blueprint, announced in 2015, outlined Beijing’s ambitions to achieve self-sufficiency in many critical tech sectors including semiconductors, which include ICs and LEDs.
However, the plan became a lightning rod in US-China trade relations after the Trump Administration labelled it a threat to US economic growth and an example of China’s allegedly unfair trade practices. Washington’s ongoing campaign to restrict China’s access to US technology has added urgency to Beijing’s desire to fast track development in this area.
But IC Insights said China will fall short of its goal given its current pace. It pointed out that the combination of its existing, undeveloped base in chip production and the increasing difficulty of sourcing chip making equipment from the US will make it impossible for China to become self-sufficient in ICs over the next five to 10 years.
IC Insights noted that IC production in China, including output by both foreign and domestic players, only accounted for 15.7 per cent of its US$125 billion chip market in 2019, a slight increase from the 15.4 per cent reported in 2014. Even if that number reaches 20.7 per cent as IC Insights forecasts, it is still far short of the 70 per cent self-sufficiency goal.
The picture is even bleaker for Beijing if foreign companies with production in China – such as Intel, Samsung, SK Hynix and TSMC – are taken out of the equation. Companies with headquarters in China accounted for just 6.1 per cent of China’s total IC market last year, which includes imports.
Overall, China-headquartered producers accounted for 38.7 per cent of domestic IC output in the country.
In a further setback this week, US chip company GlobalFoundries confirmed it had ceased operations at its chip fab in Chengdu, considered one of China’s major foreign-invested semiconductor projects when it was announced three years ago.
China’s challenge in meeting its lofty self-sufficiency target is also accentuated by its fast growing demand for IC products. IC Insights estimates that China’s IC market will grow to US$208 billion by 2024 but domestic production, including output by foreign and local players, would only reach US$43 billion.
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