Opinionated - China Chipping Away to Semiconductor Dominance

[Cybernetics]

Selling below cost is never a viable market strategy.

UNLESS...

You have an alternate source of income to offset your market losses -- the government.

Or more accurately, the taxpayers who unwittingly supports unfair market practices.

This is China and she can do whatever she want in terms of internal affairs. If the Chinese government want to force Chinese companies to use only Chinese products, that is her right. But do not present this as anything else other than unfair business practices.

At this stage in development China lacks a competitive IC infrastructure like that of the US. To avoid having its market taken over by US chip manufacturers like Intel, Nvidia, Qualcomm, etc. in a completely free market it should foster the development of domestic firms. This will provide time for less competitive domestic firms to build up the capability to eventually be able to compete with American firms. Perhaps China should be smarter in approaching the technicalities (to avoid backlash) through granting government subsidies in the form of big defense contract from the government. On the other hand in that scenario these Chinese IC firms would probably be barred from the US market due to defense related activities, even though the American IC firms gets defense contracts and still have access to the Chinese market . Obviously there is an unspoken deal between the two nations, its implicitly understood.

I do agree that running a firm by selling below cost is not a viable market strategy in the long run. The difference for Chinese IC companies is that the value they provide in the long run surpasses the subsidies they receive. IC technology is seen as a strategic industry, vital for the "national security" of China, thus it becomes sort of a public good. I wouldn't expect a nation that values "national security" to buy strategic defense products from a foreign nation that they are weary of just because the product is more competitive in the short run.

Lets be honest here, every nation wants the best for itself. Even though nations want to get along and say they want to compete in a free market its almost never the case for vital industries. Back in the 1950's the US convinced Canada that the future of wars would not be fought with fighter jets but with missiles, thus Canada was convinced (or coerced) to cancel the Avro Arrow program which was the most advanced fighter program at the time. The completed planes were later scrapped, blueprints burned. Without the program jobs in the aerospace sector was destroyed. They were then scooped up by American firms like Boeing. This was a strategic win for the US and a big loss for Canada. That loss is not something Canada can easily get back. Maintaining independence in the strategic sectors are vital to the survival of a major nation.

In addition wouldn't it be great to have more choices in the marketplace? Better for consumers imo. This would force firms to become more innovative.

I would love to have sources but can't post links yet.

 

[TaiShang]

Chinese chips not a threat to US security
By Chen Qingqing Source: Global Times Published: 2017/1/8 15:53:21

Lack of technological breakthroughs, smaller market share limits competitiveness

A worker checks chips at a company in Binzhou, East China's Shandong Province in March 2016. Photo: CFP

China's semiconductor industry, which still lags behind its foreign counterparts in technological breakthroughs, should not be seen as a threat to US national security, Chinese industry representatives told the Global Times on Sunday.

Although the domestic semiconductor industry has been developing rapidly in recent years, China has a smaller market share than the top five foreign suppliers combined, including US-based Qualcomm and Intel, said Chen Feng, vice president of Chinese fabless semiconductor maker Rockchip.

Chen is currently in Las Vegas at the CES 2017, where Samsung unveiled its latest Chromebook, reportedly powered by a Rockchip chipsets.

"US semiconductor companies still have an advantageous position, so claiming that Chinese firms pose a threat to US national security is nonsense," he told the Global Times on Sunday.

On Friday (US time), the US government released a report on ensuring long-term leadership in semiconductors from the President's Council of Advisors on Science and Technology (PCAST).

According to the report, the US semiconductor sector faces challenges in innovation, competitiveness and integrity. The report also noted "that Chinese policies are distorting markets in ways that undermine innovation, subtract from US market share, and put US national security at risk."

The US government has concerns over the development of Chinese semiconductors, which may reshape the industry's outlook and affect profits at US firms, Xu Xiaohai, senior analyst in the semiconductor industry research division at CCID Consulting, told the Global Times Sunday.

US authorities intervened in the potential merger and acquisition (M&A) of Chinese semiconductor Fujian Grand Chip Investment Fund and German firm Aixtron by telling German authorities that the purchase would be used for military purposes, Reuters reported in October 2016, citing the Handelsblatt newspaper.

The potential $732 million-deal has been put on ice since then.

In its report, PCAST argued that Chinese subsidies for strengthening domestic production encourage foreign firms to relocate to the country.

Further, higher market concentration in China, "can increase national-security risks for the US and other countries."

"The development of the domestic semiconductor industry comes from upgrading China's overall electronic information industry. The downstream industry, China's end-terminal device [computers or smartphones] assembly industry is mature, but its technical content and profit level is low. Yet the upstream integrated circuit industry has more technology and much higher profit level," Xu said.

Foreign companies still hold a large share of the global semiconductor market, according to IC Insights. The five top chip suppliers - Intel, Samsung, Qualcomm, Broadcom and SK Hynix - held 41 percent of the market in 2016, according to a research bulletin published on December 6, 2016.

While China's electronics market grows, the demand for finished semiconductors is also increasing rapidly, said a report presented by the Semiconductor Industry Association to the US-China Economic and Security Review Commission in April 2016.

China accounts for 20 percent of global personal computer consumption, 29 percent of global smartphone consumption and 17 percent of tablet computer consumption, while the country's demand for semiconductors totals nearly 27 percent of the global demand, according to the report.

The PCAST report suggests that the US government could enforce trade and investment rules as one response to challenges posed by Chinese semiconductors.

"In the Internet era, there are more and more open platforms for developers, such as Google's open developer platform, and companies need more communication to push the whole industry ahead," Chen said, noting that blocking access to the market is not a smart option.

Facing challenges

China's semiconductor companies should continue to improve the competitiveness of their core technology, not only by attracting and training high-level talent, but more importantly, through innovations to merge into the global technology and industry development.

There is still a big technology gap between the top Chinese semiconductor company and the leading international firms, according to Xu.

Semiconductor Manufacturing International Corp which has the most advanced manufacturing technology in the Chinese mainland, released their 28-nanometer technology for mass production in 2016, while Intel, Samsung and Taiwan Semiconductor Manufacturing Co have already release 14/16 nm technology, a two-generation gap.

In addition, when it comes to M&As, Chinese companies should pay more attention to international practices and rules, instead of just offering a higher price, which may spark concerns about "hostile takeovers," Xu noted.

"Stepping up efforts to respect others intellectual property rights (IPRs) and protect their own IPRs is equally important," he said.

 

[Beast]

These are just reassuring words from Chinese side. Chinese chip set will definitely eat up the share of US semi conductor. But that does not mean US will not be the dominant. Days of 95% market control by US will be over soon.

 

[TaiShang]

These are just reassuring words from Chinese side. Chinese chip set will definitely eat up the share of US semi conductor. But that does not mean US will not be the dominant. Days of 95% market control by US will be over soon.

US needs to be made feel good. This is a feel good article.

China will definitely take up more market share.

 

[cirr]

Tsinghua Unigroup planning three new wafer plants with investment totaling US$70 billion

Josephine Lien, Taipei; Jessie Shen, DIGITIMES

[Thursday 12 January 2017]

China's Tsinghua Unigroup is looking to build IC manufacturing sites in Wuhan, Chengdu and Nanjing with total investment reaching US$70 billion, according to Zhao Weiguo, chairman for the state-backed technology conglomerate.

Tsinghua Unigroup is assisting subsidiary Yangtze River Storage Technology to establish a new memory plant in Wuhan (Hebei province). Construction of the plant, which will cover an area of about 13 hectares, kicked off recently.

Total investment in Yangtze River Storage Tech's new plant in Wuhan is estimated at US$24 billion. The facility will be dedicated to producing 3D NAND flash memory with volume production slated for 2018.

In addition, Tsinghua Unigroup plans to break ground for another two plants - one located in Chengdu (Sichuan province) and the other in Nanjing (Jiangsu province) - in 2017, Zhao disclosed. Total investment in the two sites is estimated at US$46 billion, Zhao said.

In addition to memory, Tsinghua Unigroup is looking to enter the logic IC manufacturing sector, industry observers believe.

http://www.digitimes.com/news/a20170111PD208.html

 

[cirr]

Tsinghua expands IC plants

by NICK FARRELL on12 JANUARY 2017





Investing $70 billion

China's Tsinghua Unigroup is set to put the fear of god into the chip industry by rapidly expanding its chipmaking capability.

Zhao Weiguo, chairman for the state-backed technology conglomerateis said he is writting cheques totally $70 billion to build IC manufacturing sites in Wuhan, Chengdu and Nanjing.

Tsinghua Unigroup is assisting subsidiary Yangtze River Storage Technology to establish a new memory plant in Wuhan. Construction of the plant, which will cover an area of about 13 hectares, kicked off recently.

Total investment in Yangtze River Storage Tech's new plant in Wuhan is estimated at $24 billion. The facility will be dedicated to producing 3D NAND flash memory with volume production slated for 2018.

Tsinghua Unigroup will start building work on two plants in Chengu and Nanjing this year. Total investment in the two sites is estimated at US$46 billion, Zhao said.

It is starting to look like Tsinghua Unigroup wants to push into the logic IC manufacturing sector in addition to memory production.

http://www.fudzilla.com/news/memory/42605-tsinghua-expands-ic-plants

Former UMC CEO to join Tsinghua Unigroup

Josephine Lien, Taipei; Jessie Shen, DIGITIMES

[Tuesday 10 January 2017]

Shih-Wei Sun, ex-CEO of Taiwan-based pure-play foundry United Microelectronics (UMC), will join China's state-owned Tsinghua Unigroup to serve as executive VP of worldwide operations, according to industry sources.

Speculation has also circulated in the semiconductor industry that the appointment of Sun could indicate Tsinghua Unigroup's potential ambition in the contract-manufacturing business.

Sun stepped down as CEO of UMC in November 2012 and became the company's vice chairman. In January 2015, Sun applied for retirement and resignation from all positions he held within the Taiwan-based foundry.

Tsinghua Unigroup has hired Rick Tsai, ex-chairman for Chunghwa Telecom (CHT) and ex-CEO of Taiwan Semiconductor Manufacturing (TSMC), to assist in the establishment of a new 12-inch wafer plant in Chengdu and lead the contract manufacturing business within the company.

Former UMC CEO Shih-Wei Sun
Digitimes file photo

http://www.digitimes.com/news/a20170110PD200.html

China Expected to Poach More Taiwan Chip Execs

Alan Patterson

1/11/2017 05:30 PM EST



China’s Tsinghua Unigroup, which in recent years has joined other Chinese investors to pursue acquisitions of domestic and overseas chipmakers, this month hired Shih-wei Sun, a former CEO of Taiwan’s United Microelectronics Corp. as an executive vice president for Tsinghua’s global operations.

This latest news comes after several Taiwan chip veterans recently joined Chinese companies. They include former Taiwan Semiconductor Manufacturing Co. (TSMC) Executive Vice President of R&D Shang-Yi Chiang, who last month joined Shanghai’s Semiconductor Manufacturing International Corp. (SMIC) as an independent non-executive director. Former Inotera Memories Senior Deputy General Manager Liu Dawei has joined Hefei Chang Xin, and ex-Micron Memory Taiwan President Chen Cheng-Kun has taken a position at DRAM maker Fujian Jin Hua Integrated Circuit (JHICC).

“China will find it very tough to buy U.S. high-tech companies and difficult to leverage Chinese joint ventures or wholly-owned enterprises to access key U.S. intellectual property,” Andrew Lu wrote in a Jan. 10 report for Smartkarma. “We thus expect more senior Taiwan veterans to join China’s semiconductor industry as a second wave of talent moves to China.”

It’s likely that the U.S. Department of Justice (DOJ) and the Committee on Foreign Investment in the United States (CFIUS) will strengthen intellectual property protection and national security work in the next four years during the presidency of Donald Trump, Lu said.

The Smartkarma report said that Chinese chipmakers may be offering as much as three times the compensation provided by companies in Taiwan to attract the executives to the smaller competitors in China.

Despite the aggressive hiring efforts in China, TSMC, Samsung and SK Hynix will continue to dominate global foundry and memory industries with a more-than three-year lead in process technologies, yield rates and R&D spending, Lu said in the report. It will be extremely tough for SMIC and other Chinese chipmakers to catch up in the short term, he said.

Nevertheless, the recruitment of Taiwan’s senior semiconductor veterans will help China’s chip industry accelerate their R&D upgrading, process technology and yield improvements over the long term, according to Lu. Taiwan’s semiconductor industry will lose some intellectual property and operational secrets to China, he added. Such an outcome would be negative for Taiwan and global tier-two foundry and memory vendors because of potential market share losses and pricing pressure, Lu said.

Taiwan accounts for about a quarter of the world’s chip production. China aims to build up its domestic semiconductor industry as it still imports most of the chips it uses to assemble products such as the iPhone for Apple.

http://www.eetimes.com/document.asp?doc_id=1331144

@TaiShang

 

[TaiShang]

Tsinghua expands IC plants

by NICK FARRELL on12 JANUARY 2017





Investing $70 billion

China's Tsinghua Unigroup is set to put the fear of god into the chip industry by rapidly expanding its chipmaking capability.

Zhao Weiguo, chairman for the state-backed technology conglomerateis said he is writting cheques totally $70 billion to build IC manufacturing sites in Wuhan, Chengdu and Nanjing.

Tsinghua Unigroup is assisting subsidiary Yangtze River Storage Technology to establish a new memory plant in Wuhan. Construction of the plant, which will cover an area of about 13 hectares, kicked off recently.

Total investment in Yangtze River Storage Tech's new plant in Wuhan is estimated at $24 billion. The facility will be dedicated to producing 3D NAND flash memory with volume production slated for 2018.

Tsinghua Unigroup will start building work on two plants in Chengu and Nanjing this year. Total investment in the two sites is estimated at US$46 billion, Zhao said.

It is starting to look like Tsinghua Unigroup wants to push into the logic IC manufacturing sector in addition to memory production.

http://www.fudzilla.com/news/memory/42605-tsinghua-expands-ic-plants

Former UMC CEO to join Tsinghua Unigroup

Josephine Lien, Taipei; Jessie Shen, DIGITIMES

[Tuesday 10 January 2017]

Shih-Wei Sun, ex-CEO of Taiwan-based pure-play foundry United Microelectronics (UMC), will join China's state-owned Tsinghua Unigroup to serve as executive VP of worldwide operations, according to industry sources.

Speculation has also circulated in the semiconductor industry that the appointment of Sun could indicate Tsinghua Unigroup's potential ambition in the contract-manufacturing business.

Sun stepped down as CEO of UMC in November 2012 and became the company's vice chairman. In January 2015, Sun applied for retirement and resignation from all positions he held within the Taiwan-based foundry.

Tsinghua Unigroup has hired Rick Tsai, ex-chairman for Chunghwa Telecom (CHT) and ex-CEO of Taiwan Semiconductor Manufacturing (TSMC), to assist in the establishment of a new 12-inch wafer plant in Chengdu and lead the contract manufacturing business within the company.

Former UMC CEO Shih-Wei Sun
Digitimes file photo

http://www.digitimes.com/news/a20170110PD200.html

Anticipate more hysterical weeping from the US side over the monopolistic market share loss to China's rising domestic champions.

Trump is better bring lots and lots of construction and textile jobs to the working age US population.

 

[cirr]

Anticipate more hysterical weeping from the US side over the monopolistic market share loss to China's rising domestic champions.

Trump is better bring lots and lots of construction and textile jobs to the working age US population.

Aiming to become the 2nd largest semiconductor foundry in the world by 2020, SMIC is also in the midst of a major expansion with new/additional 12-inch wafer fabs being built/planned in Beijing, Shanghai, Shenzhen, Ningbo and Hangzhou.

 

[TaiShang]

Aiming to become the 2nd largest semiconductor foundry in the world by 2020, SMIC is also in the midst of a major expansion with new/additional 12-inch wafer fabs being built/planned in Beijing, Shanghai, Shenzhen, Ningbo and Hangzhou.

Bringing in established talent and recruit from Taiwan province is also a wise policy. Historically, Taiwan's easy access to new technologies at a time China was less developed and under heavy sanctions, has assisted Mainland industries (e.g., computer) to leap forward quickly in advanced manufacturing.

The tradition seems likely to continue.

 

[Dungeness]

Aiming to become the 2nd largest semiconductor foundry in the world by 2020, SMIC is also in the midst of a major expansion with new/additional 12-inch wafer fabs being built/planned in Beijing, Shanghai, Shenzhen, Ningbo and Hangzhou.

SMIC's valuation is only about 4% of that of TSMC. Long way to go.

 

[Jlaw]

Anticipate more hysterical weeping from the US side over the monopolistic market share loss to China's rising domestic champions.

Trump is better bring lots and lots of construction and textile jobs to the working age US population.

Donald is sad. He is happy with "invented and patented in China, assemble in america!"
The superpower is turning into a supapowa

 

[cirr]

SMIC's valuation is only about 4% of that of TSM. Long way to go.

Hopefully the company will see a valuation 20-30% of TSMC by 2020.

 

[Shotgunner51]

China Expected to Poach More Taiwan Chip Execs

Yes talents are key, Tsinghua Uni and SMIC should up the ante and attract more battle-hardened & experienced Taiwan execs.

In semiconductor there is also huge talent pool in Taiwanese Americans. Say Huang Jen-Hsun (founder of NVIDIA), David Sun (founder of Kingston), John Tu (founder of Kingston), Lisa Su (CEO of AMD), etc., some of them are billionaire tycoons having decisive influence in this business, let's work with them.

@TaiShang @Martian2

 

[Shotgunner51]

TSMC won 59% of Global Market Share 2016, confirms 12nm for 2017, works on 7nm for 2018

TSMC remains as world's #1 largest IC foundry, claiming 59% of global market share in 2016 as per IC Insights:

• Among the 10 largest IC foundries, 4 from Taiwan, 2 from Mainland, 1 US-based (Abu Dhabi owned), 1 from South Korea, 1 from Israel, 1 from Germany.
  
• The 4 Taiwan foundries combined market share 72.28%
• The 2 Mainland foundries combined market share 7.27%

http://www.icinsights.com/news/bull...Market-Surges-11-In-2016-To-Reach-50-Billion/
http://www.icinsights.com/data/articles/documents/945.pdf​

______________________________________________________________________________________

Taiwan Semiconductor Mfg. Co. Ltd. Confirms “12nm” Chip Technology Plans
Jan 18, 2017 at 7:40AM

As the competition for more mature chip manufacturing technologies heats up, TSMC isn't standing still.

A while back, DigiTimes reported that Taiwan Semiconductor Manufacturing Company (NYSE:TSM), a major contract chip manufacturer, planned to introduce an enhanced variant of its 16nm manufacturing technology dubbed "12nm."

On the chipmaker's most recent earnings call, an analyst asked management about this potential new technology. The company seemingly confirmed its existence, though it's not clear if the technology will, in fact, be marketed as 12nm.

Let's look at just what management had to say about the tech, and why it matters to TSMC investors.

A refinement of 16nm tech

On the call, TSMC Co-CEO C.C. Wei told analysts that its strategy is "continuously to improve every node in the performance, such as 28-nanometer." He went on to say that TSMC is "continuing to [improve] the 16-nanometers technology." Wei explained that its next revision of the 16nm technology may be worth calling 12nm because it will deliver improved "density, classical density, performance, and power consumption," according to a transcript by Seeking Alpha.

TSMC has, to date, announced several 16nm variants. The first was vanilla 16nm, which didn't seem to gain much traction as a performance-enhanced version of the technology quickly replaced it, branded 16nm FinFET Plus.

After introducing 16nm FinFFET Plus, TSMC rolled out yet another version of the technology, called 16FFC (with the 'C' standing for "compact") that allowed chipmakers to build smaller, more cost-effective chips.

The upcoming "12nm" technology looks like TSMC taking an additional step in its efforts to try to maintain technology leadership against competing 14/16-nanometer technologies, particularly as competition in those technologies heats up in the coming years.

Why it matters to TSMC investors

There are few chip manufacturing companies that can bring leading-edge technologies to market. However, over time, the weaker chip manufacturers bring out products that can compete with those the stronger companies debuted several years earlier.

Since contract chip manufacturers tend to generate significant revenues from older-generation manufacturing technologies (TSMC's 28-nanometer technology, first introduced in late 2011, accounted for 26% of the company's revenue in 2016), it is important for TSMC to remain cost/performance/feature competitive with these older technologies.

United Microelectronics (NYSE:UMC), for example, has said that it expects to begin "commercial production" of a 14-nanometer technology "by the second half of 2017," per EETimes.

China-based Semiconductor Manufacturing International (NYSE:SMI), too, is planning to introduce a "14nm" technology at some point.

By continuing to enhance its 16nm technology, TSMC should be poised to defend its market share position against upcoming competitors while at the same time keeping its cost structure competitive and its average revenue per wafer as high as possible.

All that should ultimately translate into robust revenues and profitability on this technology.

Looking out to 2017, TSMC management appears confident that it will be able to maintain its strong market share position in the contract chip manufacturing space. "I will say that we certainly do not think we will lose market share," Chang told analysts. "We're not going to grow less than foundry," he said, referring to the contract chip manufacturing, or semiconductor foundry, market.

http://www.fool.com/investing/2017/01/18/taiwan-semiconductor-mfg-co-ltd-confirms-12nm-tech.aspx

______________________________________________________________________________________

TSMC Already Working On 7nm Chips For 2018
Filip January 6, 2017 20:14 CST

10nm chipset from both TSMC and Samsung are about to hit the market. Samsung is producing Qualcomm's Snapdragon 835 chipset, while TSMC is said to be the sole supplier of the Apple A10 Fusion and A11 chips alongside MediaTek's Helio x30. To get ready for 2018, TSMC is working on the first 7nm chips.

TSMC will tackle 7nm manufacturing process in the second half of the year, and the process is expected to enter full production in early 2018. The company is currently working on the Tape Out phase, the last step in the design process for the prototype chip before commencing mass production. More information about the 7nm process will be revealed on January 15.

http://www.nextpowerup.com/news/32899/tsmc-already-working-on-7nm-chips-for-2018/

 

[Huan]

@Shotgunner51 How long before TSMC's market share starts decreasing and when Chinese SMIC will start dominating? What will be the major goal of this particular industry in Xi Jinping's Made in China 2025 strategy?