Moving out A shifting landscape: patenting in the Chinese semiconductor industry include the output of semiconductor ‘fabs’ After a decade of growth at home, operating in China that produce integrated Chinese semiconductor companies circuits (ICs) for other ‘fab-less’ companies, are poised to take a larger share which is substantially greater. Chinese of the global market. They are also government estimates indicate that total rapidly increasing their patenting production of semiconductor products in China stood at 7.1% of the world total activities. Multinationals should sit in 2010, or approximately US$25 billion. up and take note – not just in China, Under the government’s current five- but in their own jurisdictions as well year plan, China is looking to increase its worldwide share to 15% by 2015. By Howard Curtis, Gordon Holstead If one measures the Chinese share of the and Jinwei Wu world market not by the output of Chinese- domiciled semiconductor companies, but by The Chinese semiconductor industry has consumption of semiconductor products in enjoyed rapid growth, and now accounts China, the picture is starkly different. For for over 7% of global production of example, a PricewaterhouseCoopers (PwC) semiconductor products and up to 40% of study entitled Continued Growth – China’s worldwide consumption. Patenting activity Impact on the Semiconductor Industry – in China in the semiconductor sector has 2011 Update (November 2011) revealed increased even more rapidly, with domestic that consumption of semiconductors Chinese semiconductor companies now in China amounted to as much as 40% outstripping international firms at the of the world total, demonstrating the patent office in both patent applications impact of China’s vast electronic product filed and patents granted. assembly business. Chinese consumption In this article we review growth in the of semiconductors has shown a compound industry over the last decade, discuss trends annual growth rate of almost 25% over the in patenting in China over the same period, last decade, with growth of fully 30.4% in describe the methodologies and findings of 2010 to US$132 billion. a study conducted by UBM TechInsights, The Chinese market for end products in and take a closer look at the Chinese the electronics sector is also growing rapidly. semiconductor companies that are leading According to the PwC study, the aggregate the way. value of semiconductors consumed in China – which are then integrated into end Semiconductor industry growth products that are also sold in China – rose According to data released by Gartner in from approximately US$10 billion in 2003 to 2011, China accounted for just 1% of sales US$46 billion in 2010. in the global semiconductor industry. By The growth in China, in both comparison, the United States stood at semiconductor consumption and domestic 52%, Japan at 18% and South Korea at 13%. sales of downstream electronic products, However, the Gartner estimate does not creates a significant opportunity for future www.iam-magazine.com Intellectual Asset Management May/June 2013 49 Moving out growth among Chinese semiconductor applications for so-called ‘invention companies – not just in broader global patents’ rose by 24% from 2010 to 2011, markets, but domestically as well. Such to 653,000. During 2011 SIPO granted marketplace factors, together with 217,000 invention patents. SIPO experts government incentives for investment in consider trends in the filing and granting of intellectual property and growing awareness invention patents to be a better barometer of worldwide IP trends in the technology of advances in innovation than utility sector, are now driving rapid growth in model and design patents, which the agency patent filings throughout the domestic also handles. SIPO Commissioner Lipu Tian Chinese semiconductor industry. is quoted in the report as saying: “China is now at a key stage of changing its economic Patenting trends development model, which gives IP work According to a recent web-based historic opportunities.” summary report issued by the Chinese Figure 1 compares trends in the total State Intellectual Property Office (SIPO), number of patents granted in China and the Figure 1. Trends in granted patents in the United States (by the USPTO, to both US and non-US companies) versus those in China (by SIPO, to both Chinese and non-Chinese companies) 400,000 US China 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: TechInsights, 2012 Figure 2. Patents granted worldwide to the 30 leading Chinese semiconductor firms, by priority year 1,600 1,400 1367 1,200 1145 1089 1,000 822 800 778 600 566 407 400 357 356 # of patents (total) 200 124 54200040042 20 11 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Priority year Source: TechInsights, 2012 50 Intellectual Asset Management May/June 2013 www.iam-magazine.com Moving out Figure 3. Chinese semiconductor product companies – total patent holdings, including trends have emerged within the Chinese patents held outsideIngenic China Semiconductor Co Ltd 2 semiconductor sector. Of the approximately HiSilicon Technologies Co Ltd 11 161,000 semiconductor-related patent Giantec Semiconductor 13 applications filed by both domestic and Tianjin Zhonghuan Semiconductor 14 international companies between 2001 Chengdu Sino Microelectronics Systems Co Ltd 29 and 2011 in China, 25,000 were filed Beijing Huada Zhibao Electronic Systems Co Ltd 32 in 2011, as against 3,194 in 2001. Our Beijing Sigma Jinghua Microelectronics (SigmaChip) 38 work at TechInsights indicates that in GalaxyCore Inc 54 2011, domestic Chinese semiconductor Beijing Tongfang Microelectronics 62 companies held just over 23,500 active, RDA Microelectronics 63 granted patents related to semiconductors. Shenzhen State Microelectronics Co Ltd (SSMEC) 66 Figure 2 shows the growth trend over FuZhou Rockchip Electronics Co Ltd 69 time in patents held by the 30 leading Solomon Systech 86 Chinese semiconductor companies Hangzhou Silergy Semiconductor Technology Co Ltd 88 worldwide (in all jurisdictions), based on Shanghai Fudan Microelectronics Co Ltd 119 patent priority year. An upward trend from China Resources Microelectronics 121 2001 to 2008 is clear, followed by a fall-off Beijing Huahong IC Co Ltd 121 in 2009. Due to processing backlogs for Shenzhen Netcom Electronic Co Ltd 170 patent applications, the totals for recent Leadcore Technology Co Ltd 174 years will increase as SIPO processes BCD Semiconductor Manufacturing 180 additional applications to completion. Shanghai Belling Co Ltd 196 Nationz Technologies 196 TechInsights study – methodology Shanghai Huahong IC Co Ltd 202 In researching its study entitled IP Hangzhou Silan Microelectronics Co Ltd 213 Landscape and Analysis of 30 Chinese CEC Huada Electronics Design Co Ltd (HED) 214 Semiconductor Companies, TechInsights Datang Microelectronics Technology Co Ltd 217 first compiled a list of over 50 candidate Actions Semiconductor 337 Chinese semiconductor companies and then SpreadTrum Communications 913 selected from these based on the following Vimicro (Beijing Vimicro Co Ltd) 2445 criteria, in order of priority: 5000 1000 1500 2000 2500 3000 • Total annual revenue. • Total patents granted. • Key semiconductor technologies Source: TechInsights, 2012 (eg, analogue or wireless). • Key partnerships or ownership structures. United States from 2000 to 2011. Data published by SIPO indicates that Candidates for inclusion in our total filings of patent applications in China final list are semiconductor product increased more than eightfold during companies operating either as integrated this period. Filings by domestic Chinese device manufacturers or as ‘fab-less’ IC companies grew even more dramatically, design companies with no fabrication from 30,038 in 2001 to 415,829 in 2011. arm. Companies that operate primarily While marginal applications filed in as foundries and those specialising in response to government incentives discrete components or light-emitting account for some of this increase, overall diode production were excluded from our economic growth in China and a movement analysis. Also excluded were international towards a more knowledge-intensive, companies with operations in China. Some innovation-dependent economy are also of the companies profiled are actually the important factors. semiconductor subsidiaries of much larger The dramatic increase in filing rates corporations with business presences in has also created demand for more people various different sectors. with specialist knowledge of intellectual The result was a list of 30 companies, property. SIPO reports that five new which we researched further using public training centres for patent agents were set sources such as annual reports and up in 2011. The number of applicants who company websites, as well as investigations took the national patent agent qualification conducted by members of the TechInsights exam that year stood at 16,800, up 21% research team in Shanghai. from 2010. In performing patent analysis for each Data published in 2012 by China’s company and across our top 30 list in Ministry of Industry and Information aggregate, we gathered information from Technology indicates that similar patenting publicly available reference sites, such as www.iam-magazine.com Intellectual Asset Management May/June 2013 51 Moving out Figure 4. 4. US US patent patent holdings holdings