Monday, October 13, 2003
In an invited talk at the Fabless Semiconductor Association Suppliers' Expo here an iSuppli principal analyst described how consecutive Communist Party Central Committee Five-Year Plans had systematically created a native foundry industry in China from nothing.
Len Jelinek turned a microscope on the semiconductor manufacturing picture in the People's Republic of China here Thursday (Oct.9), explaining that the party had nurtured the industry, and had now begun the process of supplying it with a native base of design houses and fabless semiconductor companies.
Specifically, Jelinek pointed to reductions in value-added tax for locally-produced semiconductors, three-year depreciation schedules, huge tax breaks and major support on land and infrastructure as ways both the national and local governments encouraged the building of advanced fabs.
He further pointed out that China's entrance into the World Trade Organization had eliminated tariffs on semiconductors, at least theoretically improved intellectual property protection, and had induced the Chinese to agree to enforce anti-dumping legislation. Further, he said, recent US moves had provided powerful work-arounds to circumvent the Wassenaar Agreement that had previously made licensing mandatory for export of advanced wafer processing equipment.
He observed that all these factors had combined to nurture a huge growth in construction of fab shells. He projected that by 2007, 10 per cent of the world capacity (by wafer area) would be in China.
But Jelinek made a point that this was very different from a huge, uncontrolled fab-building program. Chinese foundries build enormous shells, he said, but facilitize them as necessary for the demand they actually see, rather than outfitting an entire 100K wafer/month fab at once. When the most recent advanced fabs came on line, he noted, there was insufficient Chinese fabless semiconductor industry to consume the capacity internally, so most of the capacity is being offered on the world market.
But when asked if the Chinese building program would force the industry back into overcapacity in 2005, Jelinek said that he thought not. "The Chinese fabs are pure-play foundries, not IDMs," Jelinek reiterated, "and that is an important difference. Because they are dependent on external demand, they will only equip the fabs to support the demand they see in the pipe. So no, I don't think they will flood the market with capacity."
By: DocMemory
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