For years, China has been seen as a potential powerhouse in semiconductors, but one whose potential has not yet been brought to bear on the market. Yet critics point out China’s late 1990’s strategy to greatly increase its numbers of high-volume IC manufacturers in the pure-play foundry segment. This ambitious project did not ever become a reality, whether from lack of investment, government support, or a simple lack of strategy and expertise, is debatable.
However, this debate is fading into oblivion. It seems that China may indeed be slowly moving from assembling our smartphones to manufacturing the chips inside them. While China has been viewed as a force mainly in terms of consuming and assembling board and system-level products, it may be poised to become a major presence in the IC industry. According to IC Insights, nine of the top fifty ranked fabless IC companies in 2014 were Chinese companies. This is up from just one, HiSilicon, in 2009, a significant increase in a relatively short time. By way of comparison, US companies represented 19 of the top 50 fabless supplier companies.
What does this mean in terms of actual numbers? China’s new presence in the market accounted for 8% of the global market, or $80.5 billion. This is compared to the US’s 64% of the market. But, when compared to others, this 8% of the global market begins to look more and more significant. For example, Japan represented less than 1% of the total market in 2014, while China held twice as much fabless IC market share as the Japanese and European companies combined.
There are two factors which experts say may indicate that China’s potential to rise to the top of the fabless IC supplier market. First, last year the Chinese company Spreadtrum became the focus of a large merger among several of China’s smaller fabless companies. The result was successful and promising enough to bring in a $1.5 billion investment from Intel.
Second, both the rise in China’s presence in the fabless IC manufacturing market and this investment do not happen in a vacuum. They are the result of, and an integral part of the country’s new industrial policies when it comes to semiconductors. China plans to invest $19.5 billion in semiconductors, adding to private equity investors. Taken together, these factors point to China as a country poised to be a big player in the IC supplier landscape into the future.