Global capital is keen on China’s integrated circuit market—companies shouldn’t lose their composure.

China’s semiconductor manufacturing industry is at a critical stage of rapid development. As key links in the semiconductor industrial chain, materials and components play an essential, foundational role in supporting the industry’s growth. From October 29 to 31, the China Semiconductor Materials and Components Innovation and Development Conference was held in Ningbo, bringing together numerous domestic and international experts, scholars, and renowned entrepreneurs to jointly chart a course for future development.

China’s integrated circuit market offers more opportunities to the world.

China has become the world’s largest market for electronic information products. In recent years, the share of China’s electronics industry in the global market has continued to rise, and among the major markets for electronic information products, China now ranks first worldwide. In particular, the smartphone market—where China accounts for 30% of the global smartphone market—has become a key driver of this growth. As the foundation of smartphones, integrated circuits have become an indispensable component of economic development. For many consecutive years, China has been the world’s largest market for integrated circuits, and its share of the global market has been increasing year by year. It is reported that in 2014, China’s share of the global market had already exceeded half, largely thanks to the rapid expansion of China’s electronic information industry.

At the conference, Lei Haibo, Deputy Secretary of the Party Committee and President of HuaLi Microelectronics in Shanghai, presented a set of data: In 2017, China’s imports of integrated circuits reached US$260.14 billion, an increase of 14.6% over the previous year, marking the fifth consecutive year that import value has exceeded US$200 billion. It is expected that integrated circuit imports will remain at a high level in the coming years. According to Lei Haibo, given the current development trends, the scale of China’s integrated circuit industry will continue to grow. In the next few years, the industry’s scale is forecasted to maintain a compound annual growth rate of 19.8%, reaching approximately US$150 billion by 2021.

Steve Johnston, Director of the Supplier Technology Development Department at Intel’s Global Supply Chain Management, is highly optimistic about the Chinese market. Steve Johnston noted that Intel has been growing in China for 33 years and has long established a fab facility in Dalian, primarily focused on technology R&D. According to Steve Johnston, Intel currently operates laboratories in both Dalian and Chengdu in China, and these labs rank among Intel’s five largest innovation labs worldwide. Steve Johnston emphasized that Intel is very eager to continue expanding the scale of its labs in China. “Throughout the years, Intel has consistently developed projects in various regions across China and is extremely keen to forge partnerships with Chinese equipment, materials, and component suppliers,” Steve Johnston said in his remarks.

Although the market is large, the self-sufficiency rate is severely insufficient.

It is understood that since 2013, China’s annual imports of integrated circuit products have exceeded 200 billion U.S. dollars, making them one of the country’s largest import categories. Data show that currently, the self-sufficiency rate for certain chips in China is as low as less than 10%, and in high-end chip segments such as memory chips, overseas giants virtually monopolize the market. At the conference, Lei Haibo pointed out that whether in the fields of storage, display, or communications, or even within electronic systems themselves, China still has many “blind spots” where domestically produced chips are virtually absent—many types of chips have zero market share. Although, over the past decade, domestic material companies have seen their sales revenue grow steadily year after year, with the proportion of product revenue rising from 17% to 43%, the vast majority of materials still rely on imports.

For example, complementary reagents such as broad-spectrum ultraviolet light, G-line lasers, 248-nm KrF excimer lasers, 193-nm ArF lasers, and packaged photoresists—within this field—the scale of China’s materials industry has now reached 3.979 billion yuan, with sales revenue totaling 190 million yuan; however, the domestic production rate stands at only 4.8%. In the area of polishing materials, the market size for polishing liquids, polishing pads, and dressing discs has already reached 2.298 billion yuan, with sales revenue amounting to 190 million yuan; yet the domestic production rate remains at just 8.3%.

John West, General Manager of VLSI Research Europe, delivered a speech at the conference titled “The Global Status and Trends of Integrated Circuit Components, as well as China’s Future Development Directions.” In his speech, John West stated that he strongly encourages Chinese companies to build their own semiconductor ecosystems and is more than happy to assist his partners in China. John West emphasized that it is extremely challenging for Chinese companies to establish truly localized ecosystems. On one hand, there are issues related to intellectual property rights; on the other hand, there is still considerable room for improvement in both technology and quality. Given this situation, John West believes that adopting a development path with relatively low risk would be an excellent choice for Chinese enterprises. For example, they could collaborate with relevant chip manufacturers to produce “alternative components,” helping companies “revamp” components that have either exceeded their warranty period or become outdated.

Industries should place great importance on cultivating “strategic patience.”

Is “secondary processing” or the creation of “substitutes” really the future of China’s semiconductor industry? According to forecasts by relevant analysis firms, by 2020, China will become the world’s largest investor in integrated circuits. The total domestic and foreign investment in China will account for 26.9% of the global total investment. As various policies are rolled out one after another, China’s integrated-circuit market will gradually develop greater depth in terms of market breadth, capital intensity, and talent pool. So how can we propel our country’s semiconductor industry forward in this rapidly changing field?

Lei Haibo stated that to develop China’s integrated circuit industry, we must first maintain strategic patience. Core technologies and certain critical “bottleneck” technologies are not only “unavailable through purchase, negotiation, or request,” but also “cannot be rushed into existence.” Enterprises should cultivate “strategic patience” and learn to let time do its work, patiently refining the industrial chain ecosystem over the long term. Second, the industry must adopt a “focused” approach. The semiconductor industry is globalized, and it’s unrealistic to achieve complete self-reliance and control. Lei Haibo believes that at the implementation level and in selecting material suppliers, companies must learn to focus their efforts—avoiding broad, all-encompassing development—and instead concentrate on identifying and breaking through with the right products. Particularly in terms of technology, we need to focus even more intensely, adopting a phased approach to achieve breakthroughs step by step, ultimately creating a situation where “we are in you, and you are in us.” Finally, enterprises must step up R&D investment and place great importance on talent cultivation—especially the development of local talent. After all, “how we nurture local talent is the key to future progress.”

As a leading company in the semiconductor industry, Intel’s talent management model is worth learning from. Speaking at the conference, Steve Johnston emphasized that managing talent is a critical driver of corporate development. For Intel, the foundation of talent management is safety—a standard that “cannot be compromised.” Steve Johnston stated that Intel provides employees with a “zero-injury” work environment, enabling the company to achieve “zero accidents” in production. In addition, Intel places great importance on the sustainability of both technology and talent, and in the future, it will strive to cultivate its own “circular capabilities.”

Original Creator: Gu Hongru