Ye Tianchun: Five Issues That Should Be Noted in the Development of Integrated Circuits During the 13th Five-Year Plan

　　During the 13th Five-Year Plan period, China’s integrated circuits will face a new industrial landscape. Under this new situation, China’s approach to developing integrated circuits should pay attention to the following five aspects.

　　During the 11th and 12th Five-Year Plans, with the launch of major national science and technology programs such as “Nuclear High-Technology Base,” “Special Project on Integrated Circuits,” and “Next-Generation Wireless Communications,” China began accelerating the deployment of innovation chains around the integrated circuit industry’s value chain. The “Several Policies on Further Encouraging the Development of the Software and Integrated Circuit Industries,” issued in 2011 (Document No. 4 [2011] of the State Council), provided substantial support to integrated circuit enterprises in areas including funding, policies, financing, and talent development, thereby speeding up the construction of the industry’s value chain. Moreover, the issuance in 2014 of the “National Outline for Promoting the Development of the Integrated Circuit Industry” (Document No. 4 [2014] of the State Council) led to the establishment of a national-level investment fund for the integrated circuit industry and simultaneously encouraged private capital investment, thus invigorating the financial chain supporting the integrated circuit industry.

　　The development of any industry requires the coordinated advancement of industrial chains, innovation chains, and financial chains. The successive introduction of the aforementioned policies has gradually created synergistic effects. In particular, the establishment of industrial investment funds will promote mergers and acquisitions in China’s integrated circuit industry as well as the integration of resources among enterprises, enabling China’s integrated circuits to enter a period of rapid growth. As a result, the gap between China’s integrated circuit industry and that of internationally advanced companies will narrow, allowing China to join the global forefront of integrated circuits. This provides the broader context for discussing industrial development during the 13th Five-Year Plan period.

　　Against such a broad backdrop, during the 13th Five-Year Plan period, China’s integrated circuit development should pay attention to the following five key aspects. First, technological R&D must place greater emphasis on innovation. The reason for this is that in the past, China’s approach to integrated circuit development was largely one of catching up. Since others had already paved the way, the general direction was unlikely to be wrong. Previously, China’s technological R&D was characterized more by “introducing, digesting, absorbing, and then re-innovating.” However, with the coordinated implementation of major national special projects and the Integrated Circuit Industry Promotion Outline, on the one hand, the pace of technological advancement has clearly accelerated; on the other hand, after extensive international mergers and acquisitions and integrations, during the 13th Five-Year Plan period, China should be able to join the global first tier. Even if it doesn’t reach the very top, it will at least be closely following the leaders. At this stage, there will be far fewer established precedents from others to draw upon, because foreign companies themselves are also searching for their next steps—everyone is still figuring out how to proceed. If China’s integrated circuits are to continue maintaining strong momentum, we must place even greater emphasis on innovative R&D, especially on original and integrated innovations, and we can no longer rely solely on imitating others. Otherwise, what would we do if others suddenly shift course?

　　Second, the state should further intensify its efforts in major special projects and key science and technology programs. We must absolutely not assume that simply pouring over 100 billion yuan into industrial funds will solve all problems. This is a mistake that China has repeatedly made throughout its history of developing the integrated circuit industry—lack of continuity in investment has led to intermittent stagnation, causing the gap between us and global leaders to widen ever further. The integrated circuit industry is one characterized by extremely rapid technological advancement and industrial development; lack of sustained investment is a cardinal sin in the development of integrated circuits. Investment, especially in research and development funding, must be continuous if we are to keep pace with the international community.

　　Third, the focus of technological innovation should be squarely on market applications. At present, there are three areas that deserve particular attention: First, the opportunities arising from China’s industrial restructuring—namely, smart manufacturing or Industry 4.0. China is the “world’s factory,” yet its manufacturing sector still largely operates at the mid-to-low end of the value chain. To make the transition to the mid-to-high end, it is essential to carry out informatization and intelligent transformation. The upgrading of the manufacturing sector presents enormous market opportunities for integrated circuits. Second, the electric vehicle market. In the future, electric vehicles will not only replace existing internal combustion engine cars but will also fundamentally transform the entire automotive industry. Future electric vehicles will evolve into information platforms. Driving itself will become just one of their most basic functions; from there, they will further develop into autonomous driving capabilities. The biggest change, however, is that electric vehicles will integrate various networks, information systems, and media platforms, ultimately becoming comprehensive information terminals. Fourth, industries related to social governance and people’s livelihoods—for example, an aging society represents a major social governance challenge as well as a huge market opportunity. Community and hospital infrastructure will all face upgrades and renovations, and a large number of sensors and processors will be deployed. Integrated circuit companies must closely track these market trends, proactively identify market needs, and drive technological innovation themselves, rather than always lagging behind others.

　　Fourth, we must continue to focus on the development of integrated circuit manufacturing. “Manufacturing is the foundation of the nation”—this is China’s national policy. As the most critical and essential product of the information age, chips must also be developed based on robust manufacturing capabilities. Manufacturing is an industry that requires substantial investment and yields results only over the long term; yet it remains the cornerstone of the entire industrial ecosystem and is absolutely indispensable. Therefore, we need to exercise patience when fostering its growth. Currently, investment in China’s integrated circuit industry is exceptionally active—a highly favorable situation. Under these circumstances, we should place particular emphasis on guiding capital with genuine intent to develop the industry, establishing a long-term, sustainable capital platform. At the same time, we must guard against excessive speculation in the capital markets, as capital driven solely by short-term speculation can severely harm the industry’s long-term development. At present, China’s integrated circuit industry is experiencing a boom, which could lead to a mixed bag of good and bad players. It is crucial to resist short-term behaviors and avoid inflating the bubble to unsustainable levels.

　　Fifth, the state must adopt a comprehensive strategic plan for the development of integrated circuits and avoid each region pursuing its own separate agenda. Currently, localities across the country are actively launching integrated-circuit industries, playing a major driving role in promoting the development of China’s integrated-circuit sector. While encouraging such initiatives, it is also essential to establish appropriate regulatory frameworks—especially by restraining local governments from attracting investment projects under the mindset of “political achievement projects,” where cost considerations are completely disregarded. Otherwise, there could be disorderly competition, repeating the mistakes made in previous years in sectors such as LEDs and solar energy, where blind investments and low-level duplication were rampant. This is particularly important when developing the integrated-circuit manufacturing industry—to avoid falling into this trap.