How’s China Doing in Terms of its ‘Made in China 2025’ ICs Goal?

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  • IC Insights has pointed out that IC production in China represented 15.7 per cent of its $125 billion IC market in 2019
  • Of the $19.5 billion worth of ICs manufactured in China last year, China-headquartered companies produced ICs worth $7.6 billion

Of the $19.5 billion worth of ICs manufactured in China last year, China-headquartered companies produced only $7.6 billion (38.7 per cent), accounting for only 6.1 per cent of the country’s $124.6 billion IC market. TSMC, SK Hynix, Samsung, Intel, and other foreign companies that have IC wafer fabs located in China produced the rest. A report by IC Insights estimates that of the $7.6 billion in ICs manufactured by China-based companies, about $1.8 billion was from IDMs and $5.8 billion was from foundries like SMIC.

“While everyone is focused on China’s moves in the memory market, becoming self-reliant in non-memory IC segments poses an even more difficult problem for China. In IC Insights’ opinion, it will take decades for Chinese companies to become competitive in the non-memory IC product segments,” read the report.

As a matter of fact, IC production in China represented 15.7 per cent of its $125 billion IC market in 2019, up only slightly from 15.1 per cent five years earlier in 2014.

The IC Insights report continued, “Although China has been the largest consuming market for ICs since 2005, it does not necessarily mean that large increases in IC production within China would immediately follow, or ever follow.”

Likely to represent about 10 per cent of the global IC market in 2024

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If China-based IC manufacturing rises to $43.0 billion in 2024 as IC Insights forecasts, China-based IC production would still represent only 8.5 per cent of the total forecasted 2024 worldwide IC market of $507.5 billion. Even after adding a significant markup to some of the Chinese foundry producers’ IC sales, China-based IC production is still likely represent only about 10 per cent of the global IC market in 2024.

“Currently, IC production in China is forecast to exhibit a very strong 2019-2024 CAGR of 17 per cent. However, considering that China-based IC production was only $19.5 billion last year, this growth is starting from a relatively small base. In 2019, SK Hynix, Samsung, Intel, and TSMC were the major foreign IC manufacturers that had significant IC production capability in China,” informed IC Insights.

Even with new IC production being established by China startups YMTC and CXMT, IC Insights believes that foreign companies will be a large part of the future IC production base in China. As a result, IC Insights forecasts that at least 50 per cent of IC production in China in 2024 will come from foreign companies such as SK Hynix, Samsung, Intel, TSMC, UMC, and Powerchip with fabs in China.

“In the wake of tariffs and trade tension between China and the United States, government officials and company representatives throughout China have doubled down on their resolve to quickly and meaningfully grow the nation’s domestic IC business in order to reduce its dependence on critical IC components currently supplied by companies based in the U.S. and other countries, read the report.

Considering that China’s first indigenous DRAM supplier, Changxin Memory Technologies (CXMT), only began limited production of its first DRAM products in 4Q19. This company has a few thousand employees and a capital spending budget of about $1.5 billion per year.

In contrast, Micron and SK Hynix each have well over 30,000 employees and Samsung’s memory division is estimated to have over 40,000. Moreover, in 2019, the combined capital spending from Samsung, SK Hynix, and Micron was $39.7 billion.

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