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Continuing to grow China’s impact on the semiconductor industry 2013 update
Technology Institute
September 2013 Table of contents
1 Executive summary 3 Overview of China’s impact in 2013 3 China’s semiconductor market 10 China’s semiconductor industry 15 Integrated circuit and O-S-D consumption/production gap and surplus 17 IC design in China 20 Chinese semiconductor companies 22 Wafer fabrication capacity 25 Packaging, assembly and test capacity 27 Top Chinese semiconductor manufacturers 30 Greater China 35 Government support and tax incentives 37 Semiconductor patents 39 Financial markets and IPO funding 41 Production growth scenarios 43 Conclusion 44 Acknowledgements 45 PwC can help Raman Chitkara Partner and Global Technology Welcome Industry Leader [email protected]
- ductor industry, we were responding to our clients’ concerns that China’s grow- ing semiconductor production would cause over-capacity in the global market. Interestingly, it is not China’s semiconductor production but its semiconduc- tor consumption which is creating headlines. In 2012, China’s semiconductor consumption market grew by 8.7% (in contrast to a 3% decline in the worldwide market) to reach a new record of 52.5% of the global market. Continued strong global demand for smartphones and tablets—the lion’s share of which are pro- duced in China—is the main reason for this continued strong growth in semicon- ductor consumption and will continue to be a factor in the coming years.
And while the growth of semiconductor production in China has fallen short of some expectations, it is nevertheless remarkable, rising 9.6% in 2012 and repre- senting about 12% of the worldwide industry. But the production/consumption gap continues to grow and represents an unparalleled market opportunity. What remains to be seen, however, is whether local Chinese companies will rise to meet this challenge.
Broadening our look, we see economic ties strengthening between China and Taiwan which serves to expand and deepen the impact of Greater China on the global semiconductor industry. Further, as the industry continues to grow and mature, we see China increasing its share of basic patents and becoming a lead- ing territory for semiconductor IPOs.
Taking all these factors into consideration, we expect that China will continue to strengthen its position in the global semiconductor industry for the foresee- impact your business, please contact me or any of the technology industry lead- ers listed at the back of this report.
Sincerely, In the last few years, as the semiconductor industry has matured, we A note to our readers have re-evaluated both the timing and depth of this report to ensure that we continue to provide needed information in a timely manner.
For this year’s 2013 Update we have elected to release a condensed report in order to provide the information earlier than past reports. found in the 2012 Update. All of the considerations described in the 2012 Update appendix, “Interpreting Chinese semiconductor statistics” and the “About this report” section remain relevant to this condensed 2013 Update and should be referred to as needed.
If you are interested in reading any of the previously issued full reports, please visit our website at www.pwc.com/chinasemicon. Executive summary
Both China’s semiconductor has continued to increase its share of consumption market and the worldwide semiconductor market semiconductor industry production by displacing all other regions. grew to new record levels in 2012 despite a 3% decrease in the The major global semiconductor worldwide semiconductor market. companies continue to dominate the China’s semiconductor consumption Chinese market. There have only been market grew by 8.7% in 2012 to reach fourteen different companies that have The major global a new record of 52.5% of the global been among the top ten suppliers to market while China’s semiconductor the Chinese market over the past ten semiconductor industry revenues grew by 9.6% to years. Seven companies have been companies continue among the top ten suppliers for every to dominate the time ever during 2012 China consumed year from 2003 through 2012: Intel, more than half of all the worldwide Samsung, TI, Toshiba, SK Hynix, ST Chinese market. semiconductor market. However, and Freescale. It still appears that almost three percentage points of there was no Chinese company within these increases were the result of the top 30 suppliers to the Chinese China’s continuing revaluation of the semiconductor market in 2012. Even Renminbi (RMB). if the largest Chinese semiconductor company sold all of their 2012 output This exceptional performance was within China, they would have not the result of the continuing transfer been within the top 30 suppliers to of both worldwide electronic equipment production and worldwide semiconductor production to China. There is now some uncertainty about China’s share of worldwide electronic the size and growth history of China’s equipment production increased by semiconductor industry. In October two percentage points to 34.2% in 2012, the China Semiconductor 2012 and is forecast to increase to Industry Association (CSIA) revised more than 40% by 2017. By our most China’s IC industry statistics for conservative comparison, China’s 2011 and 2012 year-to-date without share of worldwide semiconductor providing a detailed explanation production value increased by three for the cause and its implications. percentage points to at least 12% in We believe the reported ten-year 2012 and is forecast to increase to at compound annual growth rate least 14% by 2015. As a result, China (CAGR) for China’s semiconductor
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 1 industry from 2002 through 2012 record US$101.6bn. It is our belief remains reasonably representative. that this gap continues to contribute However, there are unanswered to the Chinese government’s ongoing questions associated with the yearly initiatives to increase indigenous and quarterly growth rates for the most recent half decade. Measured in dollars, during the last The overall performance of China’s two years China’s IC industry has IC industry (the sum of IC design, reported a 26.9% CAGR; China’s IC IC wafer manufacturing and IC design sector reported a 35.5% CAGR; packaging and testing) was the IC packaging and testing 27.1% and major contributor to China’s overall IC manufacturing 19.2%. Based upon semiconductor industry growth in these revised results, it is now deemed 2012. IC industry revenues, measured reasonably possible, if not completely in dollars, increased by 14.5% to probable, that China’s IC industry more than US$34bn in 2012. All may follow the aggressive production three sectors of China’s IC industry growth scenario through 2015 and reported double-digit growth in achieve the Ministry of Industry and Information Technology (MIIT) growth of the smartphone and IC revenue goals of over US$52bn, with IC card markets, China’s IC design sector design over US$11bn. During the same grew by 21% in 2012 to a new record two-year period, more than US$10bn US$9.9bn. Despite a 4% decline in the worldwide IC market, China’s IC were made in China’s IC industry. China’s exceptional wafer manufacturing and IC packaging While this investment rate clearly relative semiconductor supports the moderate scenario, it may continuing industry shift to outsourced have to be increased to support the performance in 2011 and manufacturing and grew by 13% aggressive scenario requirements. 2012 remains evident in and 11% in 2012 to new records of the continuing growth of US$9.4bn and US$15bn respectively. Greater Chinese companies have grown to dominate worldwide semiconductor China’s IC consumption/ China’s optoelectronics-sensor-discrete outsourced manufacturing. With production gap. (O-S-D) industry sector performance the merger of China’s HHNEC in 2012 was only slightly better than and GSMC (Grace Semiconductor worldwide O-S-D performance. Manufacturing Company) six of the Measured in dollars, China’s O-S-D top 10 (4 Taiwanese + 2 Chinese) industry sector revenues increased and 10 of the top 20 (6 Taiwanese + 2.7% in 2012 to a record US$22bn 4 Chinese) pure-play semiconductor while the value of China’s O-S-D wafer foundries were Greater China exports exceeded the value of O-S-D companies, accounting for 77% of total worldwide 2012 foundry revenues. By the end of 2012, Greater China’s exceptional relative China also represented 71% of semiconductor performance in worldwide pure-play wafer foundry 2011 and 2012 remains evident in capacity. Similarly, six of the top 10 the continuing growth of China’s IC (4 Taiwanese + 2 Chinese) and 11 of consumption/production gap. This the top 20 (8 Taiwanese + 3 Chinese) gap is the difference between IC SATS (semiconductor assembly and consumption and IC industry revenues. test services) suppliers were Greater Based upon the revised CSIA industry China companies, accounting for 48% statistics, this annual gap had grown of total worldwide 2012 SATS revenue. by US$7.6bn, (8.7%) in 2011 to Also by the end of 2012 Greater China reach US$94.9bn and grew a further represented 64% of worldwide SATS US$6.7bn (7.1%) in 2012 to reach a
2 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Overview of China’s impact in 2013
China’s semiconductor market market. Much of this exceptional China’s semiconductor consumption growth continued to be the result growth continued unabated in of China’s dominant position in the 2012. Despite a 2.6% worldwide production of smartphones and media semiconductor market contraction, tablets. Almost three percentage China’s semiconductor consumption points of this increase was the result market grew by 8.7% in 2012 to reach of China’s continuing revaluation a new record of 52.5% of the global of the Renminbi (RMB). Measured
Figure 1: Worldwide semiconductor consumption market by region, 2003–2012 (Total worldwide in US$bn)
Worldwide total in US$bn $298.3 $299.5 = US$30bn $291.6
41.7% 46.8% 52.5% China $256.3 $247.7 $248.6
34.8% $227.5 28.9% 39.5% $226.3 $213.0 24.8% 42.8% 21.5% 18.4% 20.3% 19.1% 16.7% 20.6% 17.8% ROW $166.4 21.3% 18.4%
23.4% 18.1% 19.8% 16.6% 19.4% 20.4% 19.4% 16.9% 15.5% 14.0% 12.4% Americas
15.3% 19.4% 18.1% 16.0% 18.5% 17.9% 13.2% 11.4% 13.0% 11.1% Europe 19.3% 11.4% 16.1% 18.3% 17.3% 13.5% 11.1% 18.5% 12.0% 10.7% 8.4% 7.3% Japan
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
China’s 2008–2012 share of consumption market based upon McClean Report 2013 (MCR 13) market history. Regional share of worldwide consumption market is based upon Gartner “Semiconductor Forecast Database, Worldwide” Source: SIA, MCR 13, CCID, Gartner 2011–2017 1Q13 and prior with adjustments for dislocated purchases.
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 3 in local (RMB) currency, China’s share of worldwide semiconductor semiconductor consumption market consumption grew to exceed 52% in grew by 5.9% in 2012. Although 2012 while most other regions’ shares decreased. Since 2001, the bottom of had forecast, that 5.9% local currency the prior semiconductor business cycle, growth far exceeded all other regions China’s semiconductor consumption and may be understated since most has grown at a 22.9% compounded of the semiconductors consumed in annual growth rate (CAGR), while China were sourced from multinational total worldwide consumption has only suppliers and priced in dollars, euros grown at a 6.9% CAGR. or yen. China’s reported semiconductor consumption market is greater than China consumed more than half of most market analysts’ Chinese market all the worldwide semiconductor market. As a result of growing portion of the semiconductor devices consumption during a year of consumed in China continue to be worldwide contraction, China’s purchased outside of China. This
Table 1: China’s production and worldwide share of main electronic products, 2008–2012
Production in 1000s Worldwide market share % % CAGR 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Main products Mobile phone 559,640 619,520 998,000 1,133,000 1,182,000 20.6% 44.7% 49.9% 71.3% 70.6% 74.7% Computer/PC 136,666 182,150 246,000 320,000 354,000 26.9% 47.0% 60.9% 73.4% 90.6% 86.6% Color TV 90,331 98,990 118,000 122,000 128,000 9.1% 43.9% 48.3% 47.8% 48.6% 52.3% Digital camera 81,883 80,260 90,000 82,900 62.3% 64.9%
Source: CSIA, MIIT, Digitimes Research 2010–2013
Figure 2: Analysis of China/Hong Kong consumption versus purchasing TAM semiconductor market history US$bn $150 60% Consumption market Purchase (ship to) market Dislocated market 50% Dislocated market as percent of consumption
$100 40%
30%
$50 20%
10%
$0 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Consumption market is based upon Gartner Dataquest Semiconductor Forecast Database; Worldwide & Asia/Pacific. Purchase (ship to) market is based upon Gartner Dataquest Market Share Database through 2006. Purchase TAM is based upon Gartner Dataquest Market Share OEM, IDM, and EMS Semiconductor Demand Worldwide, 2012: Database
4 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Figure 3: China’s semiconductor market growth, 2000–2012
Annual growth
50% Fixed exchange rate Annual US dollar growth 43.6% 41.2% Annual RMB growth 40%
30.3% 30.4% 30% 26.9% 29.2% 25.9% 28.6% 23.9%
23.5% 20% 18.1% 16.8% 14.6% 18.3% 8.7% 10% 6.7% 9.4% 5.6% 0% 0% -2.5% -4.1%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Market value US$bn 14.4 17.0 21.4 30.7 43.4 56.5 71.0 88.9 103.8 101.2 132.0 151.2 164.4 RMBbn 119.5 141.1 177.6 255.0 360.0 463.0 571.7 676.0 721.5 691.6 893.4 977.5 1,035.6
Note: Market reporting has changed since 2003 with sensors and optical semiconductors included as part of the optoelectronics-sensors-discrete (O-S-D) segment which along with integrated curcuits make up the total semiconductor market.
Source: CCID, CSIA
“dislocated purchasing” occurs because factors—the continuing transfer of some customers—due to supply worldwide electronic equipment chain considerations such as control production to China and the above- of key inventory items, intellectual average semiconductor content property protection and/or toll of that equipment. During 2012 processing business models—will electronic equipment production in buy semiconductor devices outside of China increased by US$42bn while China and transship them to China for it decreased marginally in the rest of use and consumption. Since 2007 we the world. As a result, China’s share have been identifying this “dislocated of worldwide electronic equipment purchasing” for the Chinese production increased by two consumption market by a comparison percentage points to 34.2% in 2012. of consumption to purchasing TAM At the same time, the semiconductor (total available market). Using a content of China’s electronic recently revised measure of purchasing equipment production remained TAM, we have found this “dislocated well above the 20% worldwide purchasing” to have only increased average at 26% in 2012. Whether the slightly since 2007 to just over 24% Chinese semiconductor consumption for the last two years. The largest market will continue to gain global share of this “dislocated purchasing” market share will be primarily has occurred in Taiwan, Korea, the determined by the future transfer of Americas and Japan. electronic equipment production. Most industry analysts predict that China’s semiconductor consumption the trend of an increasing share of market continues to grow many electronic equipment production in times faster than the worldwide China will continue over the next market as a result of two driving several years. According to Gartner,
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 5 Figure 4: China’s IC and O-S-D market growth, 2000–2012
Annual growth 60% 55.2% Same level % Optoelectronics-sensors-discretes market 50% 45.3% Integrated circuit market 41.2% 40% 40.2% 32.5% 28.2% 30% 28.3% 30.7% 24.3% 29.0% 21.1% 20% 19.5% 20.9% 21.2% 22.3% 14.9% 15.6% 16.2% 8.9% 10% 13.0% 6.7% 7.9% 1.6% 0%
0% -3.3%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Market value US$bn 3.0 3.2 3.7 5.7 8.3 10.1 12.2 14.9 17.9 18.1 23.4 26.5 28.5 US$bn 11.4 13.8 17.7 25.0 35.0 46.4 59.5 73.9 85.9 83.1 108.6 124.8 135.9
Note: Market reporting has changed since 2003 and the definition of the O-S-D (optoelectronics-sensors-discretes) market now includes sensors and optical semiconductors.
Source: CCID, CSIA
China’s share of electronic equipment the expense of displacing IC markets production is forecast to increase to more than 40% by 2017 and China’s resumption in the dynamics of China’s share of worldwide semiconductor impact on the industry. consumption to increase by a In 2012 China’s O-S-D (optoelectronics-sensor-discrete) The integrated circuit (IC) consumption market grew 7.9% to consumption market in China reach a new peak of US$28.5bn. This increased 8.9% to US$135.9bn in increase was much greater than the 2012. This increase was realized while worldwide O-S-D market increase of the worldwide IC market decreased 1% and, as a result, China’s share of 4%. As a consequence, China’s IC that market grew to 49% in 2012 (from consumption grew to represent more a revised 46% in 2011). While sensors than 53% of worldwide consumption remained the smallest segment of in 2012. During 2012 China’s IC China’s O-S-D market (at US$3.7bn), consumption increased by about it was once again the fastest growing US$11bn while the worldwide market in 2012 at 10%. Discrete devices decreased by almost US$9bn. This is remained the largest segment at US$14.6bn while growing at 9%. China’s IC consumption grew faster Optoelectronics continued as the than the rest of the world’s IC market middle segment at US$10.2bn while and China’s IC consumption grew at growing 6% in 2012.
6 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Figure 5: China compared with worldwide semiconductor market During 2012 China’s semiconductor by application, 2012 consumption continued to be Total semiconductor Percentage by application somewhat more concentrated in the data processing (computing) US$bn Mil/Aero and communications applications $400 sectors than the worldwide market while remaining slightly more Industrial/ concentrated in the consumer, less Medical/Other $300 concentrated in the automotive and noticeably less concentrated in the Automotive industrial/medical/other and military/
$200 aerospace sectors. China’s share of 2012 worldwide semiconductor Consumer consumption was largest for the data processing (computing) sector $100 and increased for all the application Communications sectors except the industrial/medical/ other sector where it declined slightly. $0 Data Since 2003 China’s consumption of processing semiconductors for the data processing (computing) applications has grown 0 10 20 30 40 50 China/HKG (GDQ) at a 19% CAGR, while consumption US$130bn, or 43.3% for communications and consumer applications has grown at 20% and of worldwide Worldwide China/HKG 12% respectively. China’s consumption for automotive, industrial, medical, Source: Gartner Dataquest military and other applications is smaller, but has grown at a faster rate Figure 6: China compared with worldwide semiconductor market of 22%. by device 2012
Total semiconductor Percentage by device China’s semiconductor consumption also remained a bit more concentrated US$bn Non-optical sensors $400 device sectors than the worldwide Optoelectronics market in 2012. China’s share of 2012 worldwide semiconductor $300 Discrete consumption decreased slightly for the general purpose analog, application- Genl. Purpose logic $200 it increased for all the other device Genl. Purpose sectors. The memory and application analog sectors continue to be the largest. Micro- Although it remained the smallest, $100 component non-optical sensors continued to be
Memory
$0 Total application- specific 0% 10% 20% 30% 40% China/HKG (GDQ) US$130bn, or 43.3%
of worldwide China/HKG Worldwide
Source: Gartner Dataquest
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 7 Table 2: Chinese Top OEMs by revenue and semiconductor consumption 2010–2012 (US$bn)
Rank Semiconductor consumption (per MIIT) Revenue (Design TAM) Purchase TAM Name of company 2011 2012 2011 2012 Change % 2011 2012 Change % 2011 2012 Change % Huawei 1 1 32.0 34.9 9.0% 3.8 4.3 12.9% 3.0 3.4 13.6% Lenovo 2 2 29.6 33.9 14.6% 7.8 8.1 4.1% 5.9 5.8 -1.8% China Electronics Corp. 3 26.4 29.0 9.8% Haier Group Company 3 4 23.7 25.8 8.9% 0.6 0.5 -9.2% 0.5 0.5 -4.6% ZTE 4 5 13.5 13.3 -1.8% 2.8 3.1 13.1% 2.5 2.6 6.1% Hisense Group 6 6 11.2 12.8 13.9% 0.4 0.5 36.0% 0.4 0.5 33.0% Changhong Electric Co. 7 7 8.2 8.3 1.7% 0.3 0.4 TCL 8 8 9.6 11.0 15.2% 1.2 1.5 26.8% 1.4 1.7 22.6% Founder Group Co. 9 9 9.1 9.8 8.1% BYD Company Ltd. 10 10 7.7 7.4 -3.9% 0.3 0.3 Total 170.9 186.2 8.9% 17.2 18.1 14.4 14.6
% Semi penetration 12.7% 13.7% 10.6% 11.1%
Semiconductor consuming subsidiaries Great Wall Technology 5 3 15.1 15.4 2.0% 0.1 0.1 Haier Electronics Group 3 4 8.0 8.9 12.2% Hisense Electric Co. 6 6 3.7 4.1 9.7%
Companies tracked from previous years Skyworth 14 13 3.6 4.5 25.7% 0.3 0.5 35.5% 0.4 0.6 30.3% Konka Group 19 17 2.5 2.9 13.9% 0.3 0.4 26.2% 0.3 0.4 26.2%
Source: MIIT, Gartner, Thomson Reuters, Company reports
the fastest growing device sector of been responsible for semiconductor China’s semiconductor consumption, consumption of US$35bn or 21% of increasing at a 52% CAGR from 2003. China’s total semiconductor market. The microcomponent, optoelectronics and memory sectors have all grown at a 20% or slightly higher CAGR number of semiconductor devices and could be important customers for the international semiconductor Table 2 is a listing of the top 10 companies intending to participate in Chinese OEMs (original equipment the continuing growth of the Chinese manufacturers) taken from China’s semiconductor market. Ministry of Industry and Information Technology (MIIT) report of “Top The major global semiconductor 100 Chinese Electronic Information companies continue to dominate the Enterprises in 2013”. Their combined Chinese market. Table 3 lists the top reported revenues increased by 10 suppliers with the largest value of almost 9% in 2012 and at China’s semiconductors consumed in China average 24% semiconductor content, during 2012. There have only been these 10 Chinese OEMs could have fourteen different companies among
8 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Table 3: Semiconductor suppliers to the Chinese market 2011–2012
Rank Revenue in US$m Market share Company 2011 2012 2011 IC 2012 IC % change 2011 Semi 2012 Semi % change Intel 1 1 23,777 25,076 5.5% 23,777 25,076 5.5% 15.3% Samsung 2 2 9,388 10,759 14.6% 9,612 11,450 19.1% 7.0% TI 4 3 4,920 5,062 2.9% 5,210 5,398 3.6% 3.3% Toshiba 3 4 4,385 4,235 -3.4% 5,322 5,152 -3.2% 3.1% SK Hynix 5 5 5,087 5,108 0.4% 5,087 5,108 0.4% 3.1% ST 6 6 3,616 3,351 -7.3% 4,742 4,359 -8.1% 2.7% AMD 7 7 4,406 4,219 -4.2% 4,406 4,219 -4.2% 2.6% Freescale 9 8 2,913 3,043 4.5% 3,426 3,561 3.9% 2.2% Renesas 8 9 2,681 2,646 -1.3% 3,452 3,260 -5.6% 2.0% Qualcomm 13 10 2,270 3,171 39.7% 2,270 3,171 39.7% 1.9%
Total Top 10 63,443 66,670 5.1% 67,304 70,754 5.1% 43.0%
Total Top 10 share of Chinese integrated circuit market 50.8% 49.1% -1.8% Chinese semiconductor market 44.5% 43.0% -1.5%
Note: Semi equals IC + Discrete (including LED) market.
Source: CCID IC Market China 2012 & 2013 Conferences–March 2012 & March 2013
these top ten suppliers over the past still noticeably better than the decline ten years (since our initial report). in the worldwide semiconductor Seven companies have been among market. The Chinese semiconductor the top ten suppliers to China every consumption market continued a year from 2003 through 2012: Intel, trend of becoming less concentrated Samsung, TI, Toshiba, SK Hynix, ST than the worldwide market. The and Freescale. Qualcomm joined this top 10 suppliers’ share of China’s consumption declined to 43% in 2012, up from number 13 and displacing down from 45% in 2011 and less than NXP which had been among the top the 51% share the top 10 suppliers to ten suppliers to China for every year the worldwide market held. However, from 2003 through 2011. During 2012 it still appears that there were no China’s consumption of semiconductor Chinese companies within the top 30 products from these ten largest suppliers to the Chinese semiconductor suppliers increased by 5.1%. Although market in 2012. Even if the largest almost four percentage points less Chinese semiconductor company sold than the growth of the overall all of its 2012 output within China, it semiconductor market in China, it is would have not been within the top 30 suppliers to that market. This is an improvement from 2011 when it would have not been among the top The Chinese semiconductor consumption market continued a trend of becoming less concentrated than the worldwide market.
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 9 China’s semiconductor industry (CAGR) for China’s semiconductor In October 2012, the China industry 2002 through 2012 remains Semiconductor Industry Association reasonably representative. However, (CSIA) revised China’s IC industry there are unanswered questions statistics for 2011 and 2012 year-to- associated with the yearly and date without providing a detailed quarterly growth rates for the most explanation for the cause and recent half decade. implications. This revision amounted to a 23% increase in China’s 2011 As now reported, China’s IC industry revenues with almost semiconductor industry growth all of the increase attributed to the continued in 2012 to exceed both IC packaging and testing sector and its consumption growth and the smaller offsetting increases and worldwide market decline. During During 2012 China’s decreases attributed to the IC design 2012 China’s semiconductor industry and manufacturing sectors. Since there grew by 9.6% to reach a record semiconductor industry were no complementary revisions to US$56.3bn. From 2002 through 2012, grew by 9.6% to reach a the prior years’ industry statistics, China’s semiconductor industry has record US$56.3bn. there is now an apparent inexplicable achieved a ten-year compounded dislocation in the growth history of annual growth rate (CAGR) of 23.6% China’s IC industry and one or more of measured in US dollars (or 20.2% its sectors. Further, there is a unique measured in local RMB currency). and noticeable difference between During 2012, US$8.4bn of additional how China’s two industry reporting agencies, CSIA and CCID, reported China’s semiconductor industry, up the 2011 and 2012 sector mix (IC almost 6% from the nearly US$8bn manufacturing versus IC packaging in investments made in 2011. Of that and testing) of the same IC industry amount, US$5.5bn was invested in revenue. We believe the reported ten- the integrated circuits (IC) industry, year compound annual growth rate 16% more than in 2011. The remaining
Figure 7: China’s semiconductor industry revenue and growth, 2000–2012
Annual growth Fixed exchange rate Annual RMB growth 50% 45% Annual US dollar growth CSIA revised industry statistics
40% 34.9% 34.9% 33.8% 33.7% 30.4% 30% 29.2% 32% 31.3% 26.6% 29.0%
20% 22.4% 20.8% 14.6% 9.6% 10%
4.7% 6.8% 2% 0% 0% -7.2% -8.8% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Industry revenue US$bn 5.0 5.1 6.8 8.3 12.0 16.1 21.7 27.4 31.4 29.2 38.1 51.4 56.3 RMBbn 41.3 42.0 56.2 68.7 99.7 131.5 172.7 208.6 218.5 199.3 257.6 332.2 354.9
Source: CCID, CSIA
10 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Figure 8: China’s O-S-D and IC industry revenue and growth, 2000–2012
Annual growth Annual O-S-D growth 60% 55.2% Annual IC growth CSIA revised industry statistics 50% 47.3% 42.5% 40.5% 40% 37.7% 34.3% 31% 30% 30.3% 29.7% 30.9% 30.4% 22.9% 27.9% 20% 26.7% 20.8% 21.5%
14.6% 14.5% 10% 9% 4.5% 2.7% 0% 0% -4.1% -9.5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Industry revenue O-S-D$bn 2.8 2.8 3.5 4.0 5.4 7.5 9.0 11.0 13.5 12.9 16.8 21.5 22.1 IC$bn 2.2 2.3 3.2 4.2 6.6 8.6 12.6 16.5 17.9 16.2 21.3 29.9 34.3
Source: CCID, CSIA
US$2.9bn was invested in the US$75bn by 2015. When compared to optoelectronics-sensors-discretes the sum of the SIA/WSTS forecast for (O-S-D) sector, 9.5% less than in 2011. worldwide device sales—plus all wafer This US$8.4bn investment represented fabrication and packaging, assembly 14.2% of the 2012 total worldwide and test values—that forecast projects semiconductor capital expenditures. that China’s semiconductor industry will account for at least 14% of the Our original comparison between worldwide semiconductor industry China’s reported semiconductor by 2015. This seems compatible with industry revenue and the sum of China’s recent 14% share of worldwide worldwide semiconductor device semiconductor capital expenditures. sales plus foundry and assembly and test services (SATS) revenues would The overall performance of China’s measure China as accounting for 16% IC industry (the sum of IC design, of the worldwide industry in 2012. IC wafer manufacturing and IC Our more conservative alternate packaging and testing) was the comparison against the sum of device major contributor to China’s overall sales revenue plus the value of all semiconductor industry growth in wafer fabrication and packaging, 2012. IC industry revenues, measured assembly and test production indicates in dollars, increased by 14.5% to more that China’s semiconductor industry than US$34bn in 2012. The same IC accounted for at least 12% of the industry revenues measured in local worldwide semiconductor industry RMB currency increased by 11.6% to 216 billion RMB. Measured in dollars, that China’s share of the worldwide all three sectors of China’s IC industry semiconductor industry is continuing reported double-digit growth in to grow, becoming both noticeable growth of the smartphone and IC the Chinese authorities currently card markets, China’s IC design sector forecast that China’s semiconductor grew by 21% in 2012 to a new record industry revenues will grow to reach US$9.9bn. Despite a 4% decline in
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 11 the worldwide IC market, China’s IC wafer manufacturing and IC packaging China’s O-S-D sector performance continuing industry shift to outsourced in 2012 was only slightly better than manufacturing and grew by 13% worldwide O-S-D performance. and 11% in 2012 to new records of Measured in dollars, China’s O-S-D US$9.4bn and US$15bn respectively. sector revenues increased 2.7% in 2012 to a record US$22bn. However According to the China Semiconductor when measured in local RMB currency, Industry Association (CSIA) China’s China’s O-S-D sector revenues only IC industry unit production increased increased by 0.1% and contributed less by 12% in 2012, while dollar unit than 1% to China’s total semiconductor average selling price (ASP) remained industry growth in 2012. Within the unchanged. Based upon the current sector, China’s LED revenues grew reported revenue values, China’s IC by 23% to US$6.8bn, while discrete industry achieved an overall self- device revenues declined by -4% to US$15.3bn. China’s reported O-S-D production versus consumption values) production unit output and ASPs in 2012, which is noticeably higher remained relatively unchanged than the 20% previously reported for during 2012. Based upon revenue 2011. As noted in prior updates, based values, China’s reported O-S-D upon the CSIA’s reported unit volumes, industry achieved an overall self- ratio for 2012 might have been of production versus consumption
Figure 9: China’s IC industry revenue and growth
Annual growth Fixed exchange rate 60% 55.2% Annual US dollar growth Annual RMB growth CSIA revised industry statistics 50% 47.3% 42.5% 40.5% 40% 43.3% 34.3% 30.4% 31.0% 30% 30.3% 30.9% 29.8% 28.8% 24.3% 20% 14.5%
10% 9.1% 11.6%
4.5% 0% -0.4%
-9.5% -11.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Industry revenue US$bn 2.2 2.3 3.2 4.2 6.6 8.6 12.6 16.5 17.9 16.2 21.3 30 34.3 RMBbn 18.0 18.8 26.8 35.1 54.5 70.2 100.6 125.1 124.7 110.9 144.0 199.4 215.9
Source: CCID, CSIA
12 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Figure 10: China’s O-S-D industry revenue and growth
Annual growth Fixed exchange rate Annual RMB growth 40% 37.7% Annual US dollar growth CSIA revised industry statistics 34.3% 35.9%
30% 29.7% 28.1% 26.7% 28.5% 22.9% 21.5% 20.8% 20% 22.3%
17.5% 15.9% 14.6% 10% 12.3%
2.7%
0% 0.1% 0.1% -4.1% -5.8%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Industry revenue US$bn 2.8 2.8 3.5 4.0 5.4 7.5 9.0 11.0 13.5 12.9 16.8 21.5 22.1 RMBbn 23.1 23.1 29.3 33.6 45.1 61.3 72.1 83.5 93.8 88.4 113.5 138.9 139.0
Source: CCID, CSIA
Figure 11: China’s semiconductor industry by sector 2003–2012
CSIA revised industry statistics $56.3 Sector market share as a percent $51.4 Yearly totals in US$bn 17.5% Integrated circuit design 15.8% $38.1 Integrated 16.6% circuit 16.1% 14.1% manufacturing
$31.4 $29.2 $27.4 17.4% Integrated 10.8% circuit packaging 10.8% 13.5% 26.2% 26.7% $21.7 and testing 18.0% 24.4% 10.8% 19.1% 17.1% $16.1 $12.0 9.5% 18.7% 28.3% 25.0% 30.1% 8.2% 17.7% Optoelectronics, 28.8% sensors and $8.3 18.2% 44.8% 39.2% 6.5% 26.2% 44.1% discrete devices 9.1% 28.4% 42.9% 44.3% 35.5% 40.0% 46.6% 41.7% 48.9% 45.3%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: CCID, CSIA
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 13 value) in 2012, which was about As a result, IC design sector revenues nine percentage points lower than grew to exceed those of the IC the revised record reported for 2011. Correspondingly, while the value of during 2012, reorganizing the sector China’s O-S-D exports exceeded the distribution from largest to smallest value of O-S-D imports for the third year in a row, that net export value 1. O-S-D devices 39.2% 2. IC packaging 26.7% The distribution of China’s industry has and testing noticeably changed over the last few 3. IC design 17.5% years as a result of the almost double 4. IC manufacturing 16.6% average growth rate of the IC design sector and the below-average growth rate of the O-S-D and IC packaging and China’s three IC industry sectors have testing sectors. Over the past ten years, grown to represent more than 60% of from 2002 through 2012, the once China’s total semiconductor industry. very small IC design sector has grown at a 43.4% CAGR, the slightly larger IC manufacturing sector at a 32.3% CAGR, while the much larger O-S-D and IC packaging and testing sectors have only grown at a 20.1% CAGR.
14 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Integrated circuit and O-S-D to 25% in 2012. According to CSIA, consumption/production gap this ratio is now expected to increase to 28% by 2015, which is up from China’s exceptional relative the 23% they had forecast for 2014 a semiconductor performance in year ago. However, this will still result 2011 and 2012 remains evident in in a further increase in China’s IC the continuing growth of China’s consumption/production gap. IC consumption/production gap. This gap is the difference between According to the CSIA 2013 report, IC consumption and IC industry China’s IC market is forecast to grow revenues. Based upon the revised to US$171bn by 2015, with IC industry CSIA industry statics, this annual gap revenue expected to reach US$49bn. had grown by US$7.6bn, (8.7%) in This forecast implies a further 2011 to reach US$94.9bn and grew widening of China’s IC consumption/ a further US$6.7bn (7.1%) in 2012 production gap to US$122bn despite to reach a record US$101.6bn. At the all the Chinese government’s plans same time, the ratio of China’s IC and efforts to contain it. It is our belief production revenue to IC consumption that this gap continues to contribute has now shown some improvement. to the Chinese government’s ongoing It had grown with yearly variability initiatives to increase indigenous from 16% in 2001 to a peak of 22% in 2007 before declining slightly to 20% in 2008 and 2010. It is now reported to Over the near term, China’s IC have grown to 24% in 2011 and further consumption/production gap continues to represent an unparalleled market opportunity, but over the China’s exceptional relative semiconductor performance in longer term, it represents a domestic industry void that will inevitability 2011 and 2012 remains evident in the continuing growth of China’s IC consumption/production gap.
Figure 12: Comparison of China’s integrated circuit consumption and production, 1999–2015
US$bn 200 CSIA revised industry statistics
150
100
Consumption 50
Production
0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Forecast period
Actual annual average FX rates used for 1999-2012, & 2012 average FX rate used for forecast 2013-2015. Source: CCID, CISA, PwC 2004–2012.
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 15 combination of transfer and expansion China’s reported discrete (including of multinational companies or the LED) production and consumption values. That difference has gone from Chinese companies? a moderate US$374m (5%) gap in 2005 to a modest surplus in 2008 and As discussed in our prior update, the only measure we have of China’s O-S-D of US$3.3bn (15%) and US$1.9bn consumption versus production is an (9%) in 2011 and 2012. Although China’s reported O-S-D sector revenues their discrete sector which consists could be understated by as much as of discrete plus LED devices but not 6% since their reporting protocols other optoelectronic or sensor devices. do not include optoelectronics other than LEDs and sensors in the sector, because it is so notably different from the IC consumption/production relative sector growth measurements. gap. Since 2005 there has not been
16 | Continuing to grow | China’s impact on the semiconductor industry—2013 update IC design in China 518 design enterprises at the end of Integrated circuit (IC) design continues 2012. As we discussed in the 2012 to be the fastest growing segment of update, there has been considerable China’s semiconductor industry. It scepticism about the size and make-up grew by 21% in 2012 to reach record of this group of enterprises as well as revenues of US$9.9bn. During the a great diversity among this group of ten years from 2002 through 2012 enterprises. It is still estimated that China’s IC design (fabless) industry there are no more than 100, possibly has grown at a 43.8% CAGR from less, local indigenous IC design US$260m to almost US$10bn. enterprises that are truly viable fabless Measured in US dollars, IC design sector revenue contributed more than 40% to China’s semiconductor Employment growth in China’s industry revenue growth in 2012 IC design sector moderated even and has grown to represent 17.5% of further in 2012. The total number China’s total semiconductor industry. of employees in the IC design sector In addition, China’s IC design sector increased by 6% in 2012 to about was responsible for about 34% of the 112,500, with the distribution shifting output of China’s IC manufacturing somewhat to the larger companies (wafer foundry) sector and 10% of with more than 100 employees. This the output of China’s IC packaging moderate increase in employee density, and testing sector. In total, China’s IC coupled with a smaller 3% increase in design sector was responsible for about the number of enterprises and a much 26% of China’s semiconductor industry greater, 21%, increase in revenue, revenue in 2012. resulted in a modest 2.4% increase in the average number of employees According to China Center of Information Industry Development increase in average sales per employee (CCID) Consulting, China had productivity to US$88,000.
Figure 13: China’s integrated circuit design industry revenue and growth, 2000–2012 Annual growth Revenue in US$bn
$9.87 120% 10
$8.14
90%
$5.38 60% 5 $3.95 $3.38 $2.97 $2.34 30% $1.52 $.98 $.54 $.13 $.18 $.26 0% 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
CSIA revised Source: CCID, CSIA industry statistics
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 17 Figure 14: Number of IC design enterprises in China, 1990–2012
2012 518 2011 503 2010 485 2009 472 2008 483 2007 491 2006 488 2005 479 2004 471 2003 463 2002 389 2001 200 2000 98 1999 76 1998 62 1997 56 1996 41 1995 32 1994 27 1993 23 1992 20 1991 17 1990 15
Source: CCID
As discussed in the 2012 update, the CCID and CSIA, the number of design only relevant comparison of company enterprises with design capabilities employee productivity we have been equal or less than 0.25 microns able to make is of the nine Chinese increased by 7% in 2012 to represent fabless companies that are included 45% of IC design enterprises, up from in the Global Semiconductor Alliance 43% in 2011. Sixty-one (61) of these (GSA) Global Financials Report enterprises had design capabilities for for 2012. The average 2012 sales equal to or less than 90 nanometers, per employee productivity of those eight more than in 2011, and several nine Chinese fabless companies was have developed 40 nanometer US$306,000, which was a surprising 27% lower than a similar 2011 average and only 54% of the GSA For most of the same reasons discussed report’s average of US$564,000 for in the 2012 update, CCID’s latest 163 worldwide fabless companies. forecast is for China’s IC design Only two of those nine Chinese sector industry to grow by an 18.8% fabless companies had an increase in CAGR over the next three years to reach US$16.5bn by 2015. If this forecast is realized, China’s IC design China’s IC design industry continued sector would represent almost 17% to make some reportable qualitative of worldwide fabless semiconductor improvements during 2012, including revenues and slightly more than 5% of the worldwide IC market. design line widths. According to
18 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Figure 15: China’s IC design enterprises by employee count, 2009 –2012
2012 2011 2010 2009
101 enterprises 6.6% 105 enterprises 6.4% 106 enterprises 5.4% 198 enterprises 2.8% 34 enterprises 32 enterprises 26 enterprises 13 enterprises
19.5% 20.8% 21.8% 23.7% 41.9% 40.5% 39.2% 38.8% 33.4% 33.6% 34.0% 31.6%
173 enterprises 210 enterprises 169 enterprises 197 enterprises 165 enterprises 188 enterprises 149 enterprises 112 enterprises
Total enterprises = 503 Total enterprises = 518 Total enterprises = 485 Total enterprises = 472
Source: CCID Size of enterprise by number of employees Greater than 500 100–500 50–100 Less than 50
Figure 16 : China’s IC design industry by process technology, 2009 –2012
2012 2011 2010 2009
12.5% 11.8% 13.3% 10.5% 13.6% 9.3% 15.7% 8.7% 65 enterprises 61 enterprises 67 enterprises 53 enterprises 66 enterprises 45 enterprises 74 enterprises 41 enterprises
31.6% 32.8% 32.6% 32.2% 42.9% 43.6% 44.9% 44.0%
222 enterprises 170 enterprises 219 enterprises 164 enterprises 218 enterprises 156 enterprises 208 enterprises 149 enterprises
Total enterprises = 518 Total enterprises = 503 Total enterprises = 485 Total enterprises = 472
Source: CCID Process technology design line width (microns) Less than or equal to 0.090 Greater than 1.0 0.35–1.0 0.11–0.25
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 19 Chinese The threshold for inclusion in this 2012 listing has increased to US$50m, up Table 4 lists the top 50 Chinese 14% from the US$44m used for the semiconductor companies that had the largest revenues in 2012. By for inclusion on the 2012 listing for are the largest indigenous Chinese and three discrete companies. The companies that design, manufacture combined reported dollar revenues (or have manufactured, the legal of the continuing 46 of these top 50 term for outsourcing), market Chinese semiconductor companies and sell semiconductor devices. increased by 10.6% in 2012, which is Therefore, neither foundries nor higher than the 9.6% increase reported packaging and testing companies are by China’s total semiconductor included on the list. They, along with industry. During 2012 these top 50 foreign semiconductor companies companies accounted for 49% of manufacturing in China, are included China’s IC design (fabless) revenues, in Table 7. but only 11% of discrete revenues and 6% of IDM and foundry revenues.
Table 4: Major Chinese semiconductor companies by revenue, 2012
Sales revenue Rank (RMB:100M) Revenue (US$m) Name of company 2011 2012 2011 2012 Change Sector 2011 2012 Change HiSilicon Technologies Co., Ltd. 1 1 66.68 74.19 11.3% 1,032 1,178 14.2% Spreadtrum Communications Inc. 2 2 42.88 43.83 2.2% 663 696 4.9% RDA Microelectronics, Inc. 3 3 18.19 24.69 35.7% 281 392 39.3% No. 55 Research Institute of China Electronics 5 4 16.24 19.70 21.3% 251 313 24.5% Technology Group Corporation Sanan Optoelectronics 4 5 17.47 16.40 -6.1% 270 260 -3.7% Hangzhou Silan Microelectronics Co., Ltd. 6 6 13.30 12.64 -5.0% 206 201 -2.5% Galaxycore Inc. 8 7 11.68 11.80 1.0% 181 187 3.6% Tianjin Zhonghuan Semiconductor Co., Ltd. 7 8 12.60 11.78 -6.5% 195 187 -4.1% Shenzhen State Micro Technology Co., Ltd. (SMIT) 9 9 11.20 11.50 2.7% 173 183 5.3% Shenzhen ZTE Microelectronics Technology Co., Ltd. 10 10 11.00 11.50 4.5% 170 183 7.3% Leadcore Technology Co., Ltd. 13 11 9.44 11.07 17.2% 146 176 20.3% Beijing Vimicro Co., Ltd. 35 12 4.78 11.00 130.0% 74 175 136.0% Allwinner Technology 13 3.23 10.58 227.5% 50 168 236.0% Jilin Sino Microelectronics Co., Ltd. 17 14 8.45 10.55 24.9% 131 168 28.1% Elec-Tech International Co., Ltd. 14 15 9.10 10.27 12.8% 141 163 15.8% MLS Co., Ltd. 11 16 10.40 9.40 -9.6% 161 149 -7.3% Shenzhen Netcom Electronic Co., Ltd. 28 17 7.59 9.37 23.5% 117 149 26.7% CEC Huada Electronics Design Co., Ltd. (HED) 19 18 8.24 9.36 13.6% 127 149 16.6%
IC design Discrete Discrete (LED) Foundry IDM
20 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Sales revenue Rank (RMB:100M) Revenue (US$m) Name of company 2011 2012 2011 2012 Change Sector 2011 2012 Change Wuxi China Resources Huajian Microelectronics Co., Ltd. 16 19 8.67 8.68 0.1% 134 138 2.7% Datang Microelectronics Technology Co., Ltd. 25 20 6.24 7.86 25.9% 97 125 29.2% Foshan Nationstar Optoelectronics 12 21 10.20 7.10 -30.4% 158 113 -28.6% Shanghai Huahong IC Co., Ltd. 26 22 6.10 6.81 11.6% 94 108 14.5% Fuzhou Rockchip Electronics Co., Ltd. 24 23 5.30 6.80 28.3% 82 108 31.6% Shanghai Belling 29 24 6.02 6.77 12.4% 93 107 15.3% Xiamen Hualian Electronics Co., Ltd. 25 6.60 105 Shanghai Fudan Microelectronics Co., Ltd. 27 26 6.10 6.30 3.3% 94 100 6.0% Wuxi China Resources Semico Co., Ltd. 20 27 8.04 6.30 -21.6% 124 100 -19.6% BCD Semiconductor Manufacturing Ltd. 15 28 8.81 6.14 -30.3% 136 98 -28.4% GigaDevice Semiconductor 29 4.85 6.11 26.1% 75 97 29.3% Fosham Blue Rocket Electronics Co., Ltd. 32 30 5.38 6.07 12.9% 83 96 15.8% Suzhou Good-Ark Electronics Co.,Ltd. 18 31 8.36 6.05 -27.6% 129 96 -25.8% Shandong Inspur Huaguang Optoelectronics Co., Ltd. 23 32 6.55 6.00 -8.4% 101 95 -6.0% Shenzhen Refond Optoelectronics Co., Ltd. 33 5.00 79 Montage Technology Group Ltd. 34 3.25 4.93 51.5% 50 78 55.4% Shanghai Epilight Technology Co., Ltd. 50 35 2.85 4.70 64.9% 44 75 69.2% Shenzhen SI Semiconductor Co., Ltd. 22 36 5.00 4.32 -13.6% 77 69 -11.4% Chengdu Yaguan Electronic Co., Ltd. 37 4.22 67 Beijing MXTronics Co., Ltd. 38 4.21 67 Shantou Huashan Electronic Device Co.,Ltd. 40 39 3.73 4.17 11.7% 58 66 14.6% Guangzhou Hongli Opto-Electronics 31 40 4.14 4.10 -1.1% 64 65 1.5% Beijing Huadazhibao Electronic Systems Co., Ltd. 34 41 4.84 4.00 -17.4% 75 63 -15.3% China Electronics Science & Technology Group 46 42 3.07 3.98 29.6% 47 63 33.0% Company No. 58 Institute Nationz Technologies Inc. 30 43 5.69 3.78 -33.5% 88 60 -31.8% Changelight Co., Ltd. 39 44 3.77 3.70 -1.8% 58 59 0.7% Forward Semiconductor Company 41 45 3.49 3.49 0.1% 54 55 2.7% Yangzhou JingLai Semiconductor (Group) Co., Ltd. 44 46 3.40 3.40 0.1% 53 54 2.7% Actions Semiconductor Co., Ltd. 49 47 3.04 3.40 11.8% 47 54 14.7% Tongfang Microelectronics Company 42 48 3.42 3.32 -2.8% 53 53 -0.3% Wuhan HC SemiTek Co., Ltd. 36 49 3.98 3.30 -17.1% 62 52 -14.9% Changzhou Galaxy Electrical Co., Ltd. 21 50 3.81 3.12 -18.1% 59 50 -16.0%
Source: CSIA, CCID, GSA, Gartner, PwC
IC design Discrete Discrete (LED) Foundry IDM
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 21 Wafer fabrication capacity However, China was able to increase Overall, 2012 was a year of wafer the effective utilization of its wafer fab capacity rationalization rather fab capacity during the past year by than growth for both China and more than 15% by further equipping the worldwide industry. During the and ramping production at existing past year, nine new LED fabs started fabs as well as improving their overall production in China with a combined utilization while worldwide effective nominal capacity of 28K 8” equivalent fab utilization decreased by about 1%. wafer starts per month (WSpM), while four existing discrete/optoelectronic, The overall relative composition of three IDM and two dedicated foundry China’s wafer fab capacity did not fabs, with a combined nominal change much during 2012. Because capacity of 100K WSpM were China has a disproportionately large decommissioned. The net result was share (21%) of worldwide discrete that the number of fabs in production and LED fab capacity, it continues to in China during 2012 remained have a much higher mix of smaller unchanged at 163, while their net wafer size (125mm or less) and nominal capacity decreased by about mature technology node (0.7µm or 3%. By comparison, the number of fabs greater) fab capacity than worldwide. in production worldwide decreased Conversely, its mix of larger, 200 by four, for a net decrease in nominal and 300 mm wafer size and leading- capacity of about 2%. Consequently, edge technology node fab capacity China’s share of worldwide fab remained less than worldwide. Not capacity in 2012 decreased slightly one of the three new 300mm fabs that
Figure 17: China’s wafer fabrication capacity and share of worldwide capacity, 2002–2012
Capacity in thousands (K 8” WSpM) Percent China wafer fab capacity 3000 (K 8” WSpM) 125% in thousands
Percent share of 100% worldwide capacity 2000 Percent growth in China 75% wafer fab capacity
50% 1000
25%
Source: World Fab Watch 2002–2012 0 0% Notes: Capacity is in thousands of 8” equivalent wafer 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 starts per month/fully ramped. This is the maximum number of wafers in wafers per month that could be 1.5% 3.2% 6.3% 6.9% 7.4% 7.3% 8.7% 9.7% 9.6% 10.5% 10.8% 10.7% started each month if the fab were fully equipped as defined in the fab design specifications and if the China’s share of worldwide capacity equipment were fully utilized.
22 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Table 5: Comparison of current wafer fab capacity, 2012
China Worldwide China’s % of # Fabs Capacity % Worldwide # Fabs Capacity % Geometry µm 117 628.2 28% 21% 510 3,046.2 14% µm 12 151.2 7% 14% 139 1,080.0 5% µm 13 202.9 9% 10% 129 2,029.8 10% µm 8 315.0 14% 14% 86 2,202.9 10% µm 8 417.2 19% 17% 69 2,464.4 12% µm 5 540.0 24% 11% 66 4,769.7 23% µm 0 0.0 0% 0% 46 4,942.4 23% N/A 0 0% 30 611.6 3% Total 163 2,254.5 100% 11% 1075 21,147.0 100%
Wafer size 4” 103 356.7 16% 34% 416 1,036.0 5% 5” 12 186.9 8% 29% 59 636.7 3% 6” 25 383.7 17% 13% 276 3,009.9 14% 8” 15 569.0 25% 10% 213 5,804.9 27% 12” 8 758.2 34% 7% 106 10,659.4 50% N/A 0 5 Total 163 2,254.5 100% 11% 1075 21,146.9 100%
Capacity = 1000s 8” equivalent wafer starts per month (KWSpM) Current capacity = world fab watch probability 1.0 Total % may differ from 100% due to rounding.
Source: SEMI World Fab Watch, Feb. 2013
Figure 18: Current wafer fab capacity comparison, China and Worldwide started production during 2012 were in China. Also, China had no wafer Capacity in millions of 8” Percentage share of capacity equivalent wafer starts per month fabs with leading-edge (28nm or less) 24 N/A & EPI That relative composition is expected R&D/MEMS to change somewhat during the 18 next couple of years as 15 of the 40 Foundry/ new wafer fabs under construction IDM worldwide are in China, representing 12 28% of new committed capacity. The O-S-D 15 include the Samsung Xi’an 300mm NAND Flash fab which, when it enters IDM 6 production in 2014, will become China’s largest and most advanced Foundry/ technology wafer fab. When all are Dedicated 0 in full production, China will have 0% 10% 20% 30% 40% 50% 60% moved somewhat closer to having a representative mix of larger wafer China capacity Source SEMI Wafer Fab Watch Feb. 2013 size and advanced technology wafer 2.3 million, or WF probability 1.0 10.7% of worldwide China Worldwide
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 23 Table 6: Comparison of committed future wafer fab capacity, 2012
China Worldwide China’s % of # Fabs Capacity % Worldwide # Fabs Capacity % Geometry µm 11 55.7 12% 56.4% 14 98.7 6% µm 1 4.0 1% 61.5% 2 6.5 0% µm 1 10.0 2% 85.5% 3 11.7 1% µm 0 0% 0.0% 4 161.0 10% µm 1 20.0 4% 44.7% 3 44.7 3% µm 0 0% 0.0% 1 67.5 4% µm 1 360.0 80% 30.3% 13 1,186.9 75% N/A 0 0% 0.0% 0 0% Total 15 449.7 100% 28.5% 40 1,577.0 100%
Wafer size 4” 11 55.7 12% 94.7% 12 58.8 4% 5” 0 0% 0.0% 0 0% 6” 0 0% 0.0% 5 44.2 3% 8” 3 34.0 8% 19.5% 7 174.0 11% 12” 1 360.0 80% 27.8% 15 1,295.6 82% 18” 0 0% 0.0% 1 4.6 0% Total 15 449.7 100% 28.5% 40 1,577.2 100%
Capacity = 1000s 8” equivalent wafer starts per month (KWSpM) Committed future capacity = wafer fab watch WFW probability 0.8 to <1.0 Total % may differ from 100% due to rounding.
Source: SEMI World Fab Watch, Feb 2013
Figure 19: Current and committed wafer fab capacity comparison, Foundry production continued to China and Worldwide constitute the largest share of China’s wafer fab capacity in 2012 at 46% of Capacity in millions of 8” Percentage share of capacity equivalent wafer starts per month the total compared to the worldwide average of 28%. IDM production only 24 N/A & EPI China Worldwide constituted 26% of China’s wafer fab capacity, compared to 53% worldwide. 18 R&D/MEMS That mix will only change moderately Foundry/ when all the committed fabs currently IDM 12 under construction are brought into production with China’s foundry IDM production decreasing to 37% and IDM 6 production increasing to 35% of total O-S-D compared to 28% and 53% worldwide. 0 Foundry/ Dedicated China capacity 0% 10% 20% 30% 40% 50% 60% 2.7 million, or 11.9% of worldwide Source SEMI Wafer Fab Watch Feb. 2013 WF probability 0.8
24 | Continuing to grow | China’s impact on the semiconductor industry—2013 update Packaging, assembly and As a result, China’s SPA&T facilities Semiconductor packaging, assembly and test (SPA&T) capacity grew in China during 2012 while it contracted the fourth year, noticeably ahead of in the rest of the world. During the past Taiwan (at slightly more than 19%) year, China reported the closure of 11 and Japan (at 13%). China’s SPA&T old SPA&T facilities, the addition of 16 existing but previously not reported of reported employees, with 23% of facilities, the opening of three new worldwide employees at the end of facilities and the expansion of several 2012, ahead of Taiwan (18%) and others, resulting in a 5% increase in Malaysia (15%). no change in number of employees. During the same time, the number the 17 planned new worldwide SPA&T of SPA&T facilities in the rest of the facilities which represented more than world decreased by two, their total 90% of the planned manufacturing and employees by 1.3%. As of the end of 2012, China had 117 SPA&T The ownership of China’s SPA&T facilities in operation, an increase from facilities changed moderately during an adjusted total of 114 in 2011. These the past year, with the share of 117 facilities represent 21% of the total facilities owned by Chinese companies number of worldwide SPA&T facilities, decreasing from 37% to 32%, offset more than 27% of worldwide SPA&T by increases in the share belonging to companies from the US (19%), Japan reported worldwide SPA&T employees. (15%), Taiwan (14%) and Korea (6%).
During 2012 China’s manufacturing Most of the growth in China’s SPA&T capacity during 2012 was realized manufacturing capacity—grew to in the semiconductor assembly represent almost 28% of worldwide test services (SATS) sector as JCET
Figure 20: Comparison of China and all remaining countries’ SPA&T resources, 2012
China Rest of world
Number of facilities 21.2% 78.8%
Number of employees 23.3% 76.7%
Amount of floor space 27.6% 72.4%
Value of production 40.8% 59.2%
Source: Gartner
Continuing to grow | China’s impact on the semiconductor industry—2013 update | 25 Figure 21: Comparison of China and all remaining countries’ SATS share of SPA&T capacity, 2012
Captive packaging Semiconductor assembly assembly and test and test services (SATS)
Number of 35.9% 64.1% facilities 40.8% 59.2%
Amount of 20.6% 79.4% floor space 41.7% 58.3%
Number of 34.0% 66.0% employees 42.7% 57.3%
China All remaining countries
Source: Gartner
started production in a very large new Packaging assembly and test remains facility in Chuzhou, Anhui that added the largest of China’s semiconductor almost 9% to China’s total SPA&T manufacturing activities when measured in terms of value added, of China’s SPA&T capacity remains production revenue, employees and dedicated to the SATS sector than that of other regions. SATS resources this relationship is often missed represent 79% of China’s SPA&T because it is allocated between two separate industry sectors: IC packaging of China’s SPA&T facilities versus 58% and testing and O-S-D. The composite and 59% for all other countries. Eight weighted average of China’s 2012 of the ten largest SATS companies had SPA&T production is now estimated to one or more facilities in China for a be about 39% of worldwide, up from a total of 19 out of the 85 top ten SATS facilities worldwide. These 19 facilities accounted for 32% of the top ten SATS
26 | Continuing to grow | China’s impact on the semiconductor industry—2013 update