The semiconductor manufacturing materials industry is experiencing steady growth, but achieving high-end domestic substitution requires overcoming five major challenges.

　　In 2014, the overall size of China’s semiconductor manufacturing materials market was 53.5 billion yuan. According to forecasts based on the current industry situation and development trends, the overall market size for semiconductor manufacturing materials in China will reach 59 billion yuan in 2015 and 64.7 billion yuan in 2016. While the industry continues to maintain steady growth, several existing issues have also prompted us to reflect.

　　1. The overall industry scale is small, and product quality is low.

　　Although in recent years the semiconductor manufacturing materials industry has seen continuous growth in product sales revenue and enterprises have steadily expanded their operational scale, the proportion of materials used in integrated circuit manufacturing in total product sales revenue remains relatively low. Moreover, the supply of materials is still concentrated on those required for integrated circuits produced at 6 inches or smaller; only a small number of material companies have begun to enter the domestic market for 8-inch and 12-inch manufacturing facilities. It will still take time to break the current situation in which key materials for high-end integrated circuit manufacturing largely rely on imports. The industry needs to continuously strengthen technological innovation and upgrade production capabilities, while also seizing opportunities presented by global industrial shifts and collaborating with major international companies or relevant institutions. By doing so, Chinese semiconductor manufacturing materials enterprises could achieve rapid development and growth in the short term.

　　II. The issue of severe product homogenization in business operations is serious.

　　The phenomenon of capacity reallocation among domestic enterprises producing silicon materials, process chemicals, specialty electronic gases, and other similar products is extremely severe. Due to the homogeneity of the products these companies offer, firms typically resort to the simple tactic of lowering prices in order to win market share, leading to vicious price competition. As a result, none of these companies has been able to reap long-term returns from the production of these products, let alone accumulate the capital and technology necessary for sustained development—ultimately harming their long-term interests. In the current industrial development environment, selecting, through market competition, companies that possess comprehensive advantages in technology, teams, management, and funding, and leveraging market mechanisms to guide the integration of resources within China’s advantageous industries, represents one viable path to addressing the issues of small industry scale and product homogeneity. At the same time, we should seize the opportunity presented by the global shift in the integrated circuit industry chain and encourage enterprises to pursue overseas mergers and acquisitions, thereby rapidly scaling up their operations.

　　3. The supply chain is incomplete, and there are bottlenecks in industrial development.

　　The production of silicon single crystals relies heavily on imported ultra-high-purity polycrystalline silicon in the 11–13N range, large-size high-end quartz crucibles and graphite thermal fields, film-forming resins for high-end photoresists, and ultra-high-purity metals used as targets for advanced sputtering. In a certain sense, controlling the technology and supply channels for these ultra-high-purity raw materials means gaining dominance over the competitive landscape of materials used in integrated circuit manufacturing. It is recommended that relevant science and technology and industrial development plans place greater emphasis on the development of technologies and industries related to ultra-high-purity raw materials, as well as on strategic industrial layouts. Furthermore, it is crucial to strengthen deepened cooperation within the materials supply chain. Only by filling the critical gap in the industrial chain—namely, the purification and refining of ultra-high-purity raw materials—can China’s integrated circuit manufacturing materials industry build a competitively viable sector and break free from its dependence on others for core components, thereby ensuring the industry’s independent and controllable development.

　　4. Insufficient accumulation of innovation factors in the industry

　　The structure of the industry’s workforce features a disproportionately low proportion of highly educated and highly skilled professionals, and there is a severe shortage of both R&D investment and investment in industrial development. A comparison of data from the decade between 2005 and 2014 shows that the overall R&D investment in China’s semiconductor materials industry was equivalent to just 22.6% of the R&D investment made by Japan’s Shin-Etsu Corporation during the same period, while the total industrial development investment was only 8.2% of Shin-Etsu Corporation’s capital expenditure. There is an urgent need for relevant authorities to pay greater attention to and provide more support for the semiconductor materials industry. Although the National Integrated Circuit Industry Investment Fund was established in 2014, no projects investing in integrated circuit materials companies have yet been implemented. Only through the vigorous development of related materials industries can we better support the growth of the integrated circuit industry. Therefore, the integrated circuit materials industry also looks forward to receiving increased attention and support from the National Integrated Circuit Industry Investment Fund, so as to accelerate the rapid development of our sector. In addition, besides continuing to attract top international talent specializing in technology development, we should place particular emphasis on recruiting talent in areas such as enterprise management, market development, and international mergers and acquisitions, and combine this with the cultivation of local innovation teams to bolster technological innovation and large-scale industrial development.

　　V. The current import and export tax rates pose unfavorable factors for the development of the domestic semiconductor materials industry.

　　Currently, imported materials used in semiconductor manufacturing from overseas generally benefit from low import tariffs and tax refund or exemption policies. In contrast, when domestic enterprises export their products, they are subject to the tariff rates applicable to industrial goods as listed in the relevant catalog. This single factor alone increases the cost of domestic products by 5% to 15% compared to similar foreign products, directly undermining their market competitiveness. We hope that the relevant authorities will establish a special tariff schedule specifically for materials used in semiconductor manufacturing and, based on the current state of domestic industrial development, adjust tariffs and taxes in a timely manner, ensuring that domestic enterprises enjoy a tax and tariff policy that is fair and equitable compared to their foreign counterparts. In addition, we urge the authorities to formulate concrete implementation rules that genuinely benefit the integrated circuit materials industry, taking into account the objective laws governing its development, so as to encourage integrated circuit materials companies to actively pursue innovation and development.