China Looks to Become a Major Force in Semiconductors
by James Carbone in Global Purchasing
OEMs can expect procurement managers to be making more business trips to China in the near future as the country becomes a more significant player in the global chip industry.
For two decades now, China has been known as the world’s low-cost manufacturing center for electronics equipment built by large global electronics manufacturing services (EMS) providers such as Foxconn, Flextronics, Jabil, and others. But the country’s recent investment in semiconductor manufacturing is changing that perception as China looks to compete directly with South Korea and Taiwan for a share of the global chip market.
As part of a 10-year plan announced by the Chinese government in 2014, about $150 billion is being invested by the government and equity firms in the Chinese semiconductor industry and that investment will soon start to deliver returns.
Researcher IC Insights says that China initially targeted the foundry market, but those efforts faded when China could not gain foundry market share because it was unable to keep up with technology advances at foundries in other countries. It then decided to pivot into the fabless market, which has led to significant growth for Chinese fabless IC suppliers.
China is making huge investments in development and production of semiconductors and has set some lofty goals for its chip industry. For instance, it wants to produce semiconductors using 16/14nm process technologies and make chips on 450mm wafers by 2020, according to IC Insights.
Because of its investment in the chip industry, analysts say China will become an important manufacturer of semiconductors, including memory ICs, application processors, and logic, which will have a major impact on supply and pricing for many semiconductors. Supply of some semiconductors could increase by as much as 20%, which will depress market prices and negatively impact competitors.
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