Opinionated - China Chipping Away to Semiconductor Dominance

[shuttler]

^^^ @Speeder 2

Do you know SMIC is a public listed company
So are companies like Lenovo, Tencent etc

Huawei is not listed which is doing better than ZTE (listed)

As for change, I think SMIC's management are seeing that having to answer to their shareholders and the board
It takes time for China to completely match the hi-tech prowess of some other countries but so far we are fine
The likes of Huawei, Lenovo, Tencent, SMIC, Xiaomi is annonymous 10 years ago.

Many times state owned companies are providing an incubating environment for home-grown companies to get matured but of course they have pros and cons, success and failures.

 

[bolo]

My 2 cents, not an expert on semicon though:

Simply due to population size, Samsung of S Korea just can’t compete with the leading firms from the US, China, the EU and Japan in the long run.

Intel, or other world leading US high tech firms in general, enjoys a decisive systematic advantage over SMIC and most other top tech firms of China, namely the world’s largest and the most complete cross-discipline Value Chain . This makes it very hard for China to compete with at the top end.

By "value chain" I specifically mean the broad sense (in contrast to usual narrow sense industrial value chain) individual-centred innovation culture + well-funded R&D integrated into complete industrial value chain + supplemented by the relatively efficient (and the most powerful) financial machenism particularly WS investment banking and VC.

Under such a system, an innovative individual is proactively encouraged culturally and financially to come up with fresh ideas. And these ideas (not neccesarily even world-leading some times compared to their potential competitors in the rest of the world, e.g. Facebook, or Microsoft ), could be more easily discovered,nurished, and well-financed immediately by either locally-based VC or universities, before being recommended, assisted and adopted by local industry leaders and eventually propagated throughout the rest of the world being the next gen gold standard by both the local world-class industries and universities, valued and supported in int’l capital market by the most powerful financial force – WallStreet.

China currently is no match for this "killer app", if its current financial sector ( particularly investment banking and VC), deep and systematic integration of local universities & industries, and its party-dominated (instead of private industrialists-dominated) large companies are not up to the same, or even better, standard of efficiency.

That’s why we see most of ground-breaking innovations which eventually lead the world next gen industrial standards come from the West, particularly the US.

This then leads to the popular myth that “Westerners can innovate, and the Chinese lack genes of innovation but just copy”. It is not gene, but more the aforementioned system behind the scene that makes or breaks, let alone the fact the many who are mainly responsible for so-called “westerners innovations” are in fact “the Chinese” who happen to live in the West.

So on the topic, even though Huawei and ZTE show that it can be done to some extent in one area (i.e. telecom), without deep and thorough re-structuring of Chinese party-owned large industries and universities to become more “Huawei-alike” at least, China (e.g. SMIC etc) is unlikely to match, let alone surpass, most other key industrial sector leaders of the US, such as what Intel and ARM do in semicon, in the foreseeable future I am afraid, simply because the US is bound to constantly generate the next “Steven Jobs” systematically, while the relatively inefficient Chinese system is bound to bury, or at least drag the legs of, the next “Chinese Steven Jobs” systematically .

In order to compete with the US on key tech, China must change.

Not sure if you ae aware, less than 2% of all businnesses in Canada are publicly traded companies. I'm assuming USA is similar .

 

[ChineseTiger1986]

China doesn't have to follow the US model to beat the US, since you can never beat them in their own game rules.

To worship the western political/economic system is a dangerous mindset.

And to try to link how the western products are overwhelming "better" with their political/economic model, regardless the fact that they have been started much earlier, it is a dangerous misleading opinion that intends to lead China into a dangerous path.

 

[Kyle Sun]

Intel is declining.

 

[Martian2]

TSMC, ARM announce first 16nm FinFET tapeout of big.LITTLE Cortex-A57 SoC | ExtremeTech

There are four distinct stages in semiconductor production.

1. Test wafer. This is a proof-of-concept. It shows the underlying technology is capable of producing an advanced chip.

2. Tape-out. "Taping out refers to the initial design of the chip having been completed for creation of the masks that will be used to print the actual chips, although further tweaks are likely as test production is carried out."[1]

3. Risk production. "'Risk production' is used in the semiconductor industry to describe the first general availability of a new IC process, following the preceding test chip phase that manufacturers use to wring out a new technology."[2] In plain English, risk production refers to creating a few batches of wafers to determine yield and an opportunity to improve the process technology.

4. Mass production.

4a. Initial mass production. If there are serious problems with the process technology, yield per wafer can be as low as single digits to 30%.

A decent initial mass production yield is 50%.

4b. Ramp up. Mature mass production yield is 95%.[3] The time between initial mass production (with relatively low yield) and mature mass production after ramp up (with high yield per wafer) is typically one to two years.

References:

1. Apple and TSMC Reportedly Completing Designs for 20-nm A7 Chip With Early 2014 Availability - Mac Rumors
2. EDA vendors roll out advances for 20 nm design - DSP-FPGA.com
3. Report: Low yields force TSMC to revert to 8 inch wafers for Apple iPhone 6 fingerprint sensors
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6-core 16nm FinFET ARM Cortex-A57 chips spotted in the wild | SemiAccurate

"6-core 16nm FinFET ARM Cortex-A57 chips spotted in the wild
MWC 2014: Not just one, a full wafer of them fresh from the oven
Mar 3, 2014 by Charlie Demerjian

What do you get when you put a 6-core ARM A57 on TSMC’s 16nm FinFET process? A lot of pretty pictures and a really big bunch of test chips to play with too.

At MWC last week, SemiAccurate spotted a nice A57 wafer hidden away in the ARM booth. Not much was said about it other than 16nm, TSMC, and A57 cores all of which, “Taped-out February, 2014″. That means it is as fresh tasting as it is pretty.

If you look at the wafer below, it is pretty obvious that there are six cores on the die plus a bunch of other test structures. This is a test chip after all, and the purpose is to optimize the A57 core for the upcoming process, and given the time from tape-out, it is hot from the oven. This means the work on the process is still ongoing and likely far from done.

[My personal comment to explain a physical phenomenon: The different structures on the chip act as a diffraction grating, because the geometry is smaller than the wavelength of visible light. Hence, the spectrum of colors.]

Pretty, shiny FinFETs make big cores from small transistors

Why would you do something as complex as a multi-core A57 SoC that will never actually be a product? Remember ARM’s PoP IP? It takes a lot of work to get to the point of having an almost turnkey solution for licensees, and if a foundry does it right, it is a serious competitive advantage for them. In short this kind of thing is the homework that makes a licensee’s life easier. For the rest of us we get pretty pictures and SoCs with new cores faster. Hard to argue that one."

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TSMC, ARM announce first 16nm FinFET tapeout of big.LITTLE Cortex-A57 SoC | ExtremeTech

"TSMC, ARM announce first 16nm FinFET tapeout of big.LITTLE Cortex-A57 SoC
By Joel Hruska on February 25, 2014 at 11:45 am

TSMC and ARM have announced a further milestone on the road towards 16nm FinFET production, with the first successful tapeout of an asynchronous big.LITTLE SoC that pairs four Cortex-A53 cores with two Cortex-A57s. This follows the two company’s joint collaboration on a single Cortex-A57 core 10 months ago, and means that 16nm FinFET designs are moving towards fruition — though full production is still a little ways down the road.

For ARM, advancing an asynchronous big.LITTLE chip is a critical part of its strategy to drive adoption of its power reduction technology. The first generation big.LITTLE devices are all synchronous, meaning that companies like Samsung implemented four small cores alongside four large ones (typically a Cortex-A7/Cortex-A15 pairing). This made it easier to switch between operating modes — the operating system never saw more than four cores at any time, so it couldn’t become confused about which processors to run on which CPUs. A 4:2 pairing makes more sense from an optimization perspective where manufacturers may only want two cores for occasional burst activity and heavy lifting, but it requires more tuning on the OS front.

According to ARM, this new SoC more closely resembles the kind of test chip that a customer might actually build in a shipping product — though it’s still a test chip and not a commercial design. (article continues)"

 

[antonius123]

My 2 cents, not an expert on semicon though:

Simply due to population size, Samsung of S Korea just can’t compete with the leading firms from the US, China, the EU and Japan in the long run.

I doesnt need population size of the origin country if the company has strong global brand.

If Samsung can keep their lead in technology, price and reputation, they still can lure clients to use their fab.

 

[bolo]

China doesn't have to follow the US model to beat the US, since you can never beat them in their own game rules.

To worship the western political/economic system is a dangerous mindset.

And to try to link how the western products are overwhelming "better" with their political/economic model, regardless the fact that they have been started much earlier, it is a dangerous misleading opinion that intends to lead China into a dangerous path.

Very true. Someone who invented the game will make and change rules to favour them.

 

[tranquilium]

I doesnt need population size of the origin country if the company has strong global brand.

If Samsung can keep their lead in technology, price and reputation, they still can lure clients to use their fab.

No, what Speeder 2 said is true. Population size does matter a lot.
First of all, regardless of the place, a company is primarily made up of local residents. With a larger population (and appropriate education) there are simply more people that can be hired to work at certain local.
Second, the domestic market gives very important home field advantage. Not only you are not going to worry about things like custom fees and other taxes to bump up the cost, you also have various policies to assist you against foreign competitors. With a large enough domestic market, the company gain enough of a competitive edge that it can stand against stronger competitors.
Third, with a large enough population, the country can also have enough support and associated industry for the company. For example, a chip producer must work with a number of associated firm, such as silicon refineries, phone makers, universities for researches, etc. If all these industries are located in the same country, share the same culture and language, then it will be significantly easier for them to do business with each other and reduce the transaction cost, thus making the company more competitive.
This is just competition in normal time. There are also additional factors. For example, political pressure and trade barrier from foreign silicon refineries may jack up the production cost. Or increase trade barrier may cause the chip to lose competitiveness in foreign market. Or even wars may disrupt the supply and demand chain.

So overall, the population, especially a population with high education and living standard will help a company tremendously. While it is true that population doesn't make you automatically better, when we are talking about top level competition, every little bit of edge helps.

 

[antonius123]

No, what Antonius123 said is true. Population size does matter a lot.
First of all, regardless of the place, a company is primarily made up of local residents. With a larger population (and appropriate education) there are simply more people that can be hired to work at certain local.
Second, the domestic market gives very important home field advantage. Not only you are not going to worry about things like custom fees and other taxes to bump up the cost, you also have various policies to assist you against foreign competitors. With a large enough domestic market, the company gain enough of a competitive edge that it can stand against stronger competitors.
Third, with a large enough population, the country can also have enough support and associated industry for the company. For example, a chip producer must work with a number of associated firm, such as silicon refineries, phone makers, universities for researches, etc. If all these industries are located in the same country, share the same culture and language, then it will be significantly easier for them to do business with each other and reduce the transaction cost, thus making the company more competitive.
This is just competition in normal time. There are also additional factors. For example, political pressure and trade barrier from foreign silicon refineries may jack up the production cost. Or increase trade barrier may cause the chip to lose competitiveness in foreign market. Or even wars may disrupt the supply and demand chain.

So overall, the population, especially a population with high education and living standard will help a company tremendously. While it is true that population doesn't make you automatically better, when we are talking about top level competition, every little bit of edge helps.

Access to those local resident/population (pool of worker), associated industry (silicon refineries, phone makers, universities researchers etc), handling trade barrier can be settled by global giant company like Samsung or TSMC by establishing their factories in that country (China).

Look at how Samsung and TSMC from small country (Korea, Taiwan) can keep their leadership againts competitor from China, Japan, even US. They are seek by Chip designers because of technology and reputation that they have with competitive price.

 

[tranquilium]

Access to those local resident/population (pool of worker), associated industry (silicon refineries, phone makers, universities researchers etc), handling trade barrier can be settled by global giant company like Samsung or TSMC by establishing their factories in that country (China).
Look at how Samsung and TSMC from small country (Korea, Taiwan) can keep their leadership againts competitor from China, Japan, even US. They are seek by Chip designers because of technology and reputation that they have with competitive price.

For short terms, maybe, for long terms it is another story entirely. This can be observed the rise and decline in Taiwan's software and semiconductor industry in the past two decade.

 

[antonius123]

For short terms, maybe, for long terms it is another story entirely. This can be observed the rise and decline in Taiwan's software and semiconductor industry in the past two decade.

If Samsung or TSMC can be leader globally now including in China market, there is no reason that they wont be able in the future as long as they can maintain their technology lead, brand image, and efficient production.

Rise and decline of business is a dynamic of a business. If company cannot anticipate and adapt the business environment (market trend, technology progress, competition) then they should be prepared to loose market share even go to bankruptcy. Sanyo, Toshiba, Sony, Kodak are some example.

China huge market could be good for her own companies, but also could be good for foreign company. Car manufacturing is one example. See how foreign car industry take advantage of chinese market more than domestic car producer, because the foreign car mfg has strong brand reputation, better technology, and supply chain.

 

[shuttler]

If Samsung or TSMC can be leader globally now including in China market, there is no reason that they wont be able in the future as long as they can maintain their technology lead, brand image, and efficient production.

Rise and decline of business is a dynamic of a business. If company cannot anticipate and adapt the business environment (market trend, technology progress, competition) then they should be prepared to loose market share even go to bankruptcy. Sanyo, Toshiba, Sony, Kodak are some example.

China huge market could be good for her own companies, but also could be good for foreign company. Car manufacturing is one example. See how foreign car industry take advantage of chinese market more than domestic car producer, because the foreign car mfg has strong brand reputation, better technology, and supply chain.

The basic pillars of a successful products are the 3 or 4 Ps of marketing:
Product
Promotion
Price
and
Place

The conventional wisdom of marketing for most products is to start off growing from within then develop overseas for expansion due to obvious reasons. So the larger the no of consumers the better

To help business to be success locally, a sizeable mass of people who can afford to buy your products is a always a plus. Our semi-conductor companies have struck the proper cord to flourish in China because:
1. the products fit into the growing and affordable handset and computer markets
2. Price - obvious reasons
3. Place - obvious reasons
4. Promotion for semi conductors is different from most consumer products. The functionality of the products is the key

Samsung also started off its business in S Korean. Since its the population of S korea is relatively small so it needs overseas expansion for sustainable growth

In the handset market, China brands still can hold on to its market shares and they are gaining prominence overseas because all the Ps are there

As for China made cars, they are facing very hard times to compete with foreign brands at the moment because the most important factor - product quality lags behind Chinese consumers' growing critical demands which are in tandem with their increasing personal wealth and purchasing power

Car making asks for more complicated technology than making mobile handsets

In this regard, there is still a lot of rooms for us to improve and catch up with foreign brands

 

[shuttler]

Some argue that People and Purpose are also factors so expanding to 6 Ps of Marketing Mix

I think there is one more P to add to the 4 or 5 above:

Politics

Examples: Huawei, HQ9, JF-17, iranian oil, currencies

 

[Martian2]

My comment on BusinessWeek.

Taiwan's Protests Point to a Deeper Crisis | BusinessWeek

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Business is booming at Taiwan Semiconductor Manufacturing Company (TSMC). They are fully booked for the next six months.

TSMC capacity booked to the end of 3Q14 | DigiTimes

 

[rott]

The basic pillars of a successful products are the 3 or 4 Ps of marketing:
Product
Promotion
Price
and
Place

The conventional wisdom of marketing for most products is to start off growing from within then develop overseas for expansion due to obvious reasons. So the larger the no of consumers the better

To help business to be success locally, a sizeable mass of people who can afford to buy your products is a always a plus. Our semi-conductor companies have struck the proper cord to flourish in China because:
1. the products fit into the growing and affordable handset and computer markets
2. Price - obvious reasons
3. Place - obvious reasons
4. Promotion for semi conductors is different from most consumer products. The functionality of the products is the key

Samsung also started off its business in S Korean. Since its the population of S korea is relatively small so it needs overseas expansion for sustainable growth

In the handset market, China brands still can hold on to its market shares and they are gaining prominence overseas because all the Ps are there

As for China made cars, they are facing very hard times to compete with foreign brands at the moment because the most important factor - product quality lags behind Chinese consumers' growing critical demands which are in tandem with their increasing personal wealth and purchasing power

Car making asks for more complicated technology than making mobile handsets

In this regard, there is still a lot of rooms for us to improve and catch up with foreign brands

haha....I think the Companies in China should hire you