The China Semiconductor Mandate for Success

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INTRODUCTION

Since 2015, the China semiconductor industry has been on a growth trajectory to double its fab capacity as it endeavors to become an acknowledged leader in the global semiconductor market.

The task ahead is to grow its share of worldwide fab capacity from 12% to 20% by 2020. In fact, the country recently pledged to increase financial support to sectors that boost manufacturing innovation, such as the Internet of Things (IoT), smart appliances, and high-end consumer electronics, as part of its Made in China 2025 strategy.

Currently, China has the largest share of the consumer electronics market, accounting for over 80% of the manufacturing output for smartphones, 70% for laptops and tablets, and well over 60% for flat panel TVs. However, most of the integrated circuits (ICs) they use for these products are imported, and the gap between the local IC supply and the local manufacturing demand continues to widen. This trade imbalance is viewed as a critical issue impacting China’s strategic position with respect to the global economy and geopolitical/security standing. As such, there is an initiative underway to build a local semi-conductor ecosystem comprising fabless, integrated device manufacturers (IDMS), foundries, and out-sourced semiconductor and test (OSAT) providers targeted to generate $143B in revenue by 2020. China’s current pace of progression in this area suggests that this is an attainable goal and since 2015, China has outpaced every other semiconductor region in new semiconductor fabrication facility (fab) production, with 24 new fab projects currently underway, 19 of which are locally-owned.

High investments continue to flow into China’s semiconductor market from both private equity and the Chinese government, for both short-term talent acquisition and long-term R&D investment. Currently the memory market is a key area of focus as it is less complicated to support and an easier entry point than advanced logic. Consequently, Chinese semiconductor manufacturers will pose a more immediate threat to manufacturers like SK Hynix and Micron than logic manufacturers such as Samsung, TSMC, and Intel.

Investment in the China semiconductor industry, and particularly its focus on memory − which consumes the largest volume of specialty gases and advanced chemicals − is providing enormous opportunities  and significant challenges. This paper explains the importance of establishing a local supply chain that focuses on delivering specialty chemistries that are of the purest quality, while ensuring reliability of supply, as well as adherence to China’s strict safety and environmental requirements.

WHY MATERIALS ARE CRITICAL TO NEXT-GENERATION IC DEVICES?

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