China's aim of satisfying 70 per cent of its own semiconductor with home-baked product by the year 2025 will fall well short of that target according to analyst outfit IC insights.
China wants to make its own silicon because it realises it is exposed to trade disputes that can – as has come to pass with the USA’s ban on Huawei – make it hard for local companies to source the components they need. Those fears, and a desire to grow local industry to achieve global leadership positions, led the country to prioritise development of its semiconductor industry in the 2015 policy called "Made in China 2025".
But IC insights suggests the semiconductor part of that plan will struggle to achieve a target of 70 per cent local production by 2025, instead reaching around 21 per cent in 2024.
One reason for the miss is that plenty of non-Chinese semiconductor manufacturers operate in the Middle Kingdom.
"Of the $19.5 billion worth of ICs manufactured in China last year, China-headquartered companies produced only $7.6 billion (38.7%), accounting for only 6.1% 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," the analysts write.
In some fields, China just isn’t anywhere near up to speed. IC Insights used DRAM as an example of that predicament:
"Consider 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. Now that's a reality check!"
"Currently, China is putting on a brave face with regard to its future IC industry capabilities," the analysts conclude, adding that its team "believes it is essentially impossible for China to make significant strides in becoming self-sufficient for its IC needs (memory and non-memory) within the next 5 years and probably not even within the next 10 years."
Which gives the likes of Intel and Samsung ten years to figure out what happens once the China market disappears. And that worrying can start against a background of what IC Insights predicts will be an industry-wide COVID-19-caused Q2 semiconductor sales dip of negative 5 per cent.
Some semiconductor firms have predicted growth, principally from 5G and flash memory. But the rest of the industry sees some pain. ®