According to a report by Reference News on March 30, South Korean media states that China is investing heavily to develop its semiconductor industry. China’s state-owned semiconductor company Wuhan Xinxin Semiconductor Manufacturing Corporation announced a joint investment of $24 billion with American semiconductor design firm Cypress to establish a memory production base in Wuhan, Hubei Province. Tsinghua Unigroup, affiliated with Tsinghua University, has also announced plans to invest $30 billion to build a semiconductor factory.
“After dominating the domestic market, we will expand globally”
According to a report from South Korea’s Chosun Ilbo on March 30, China’s strategy is to first dominate the domestic market and strengthen its capabilities before competing globally with companies like Samsung Electronics. Local Chinese companies such as Foxconn, Haier, and Huawei, which have long been manufacturing Apple products, have recently grown into major international enterprises. China believes that once these local companies become customers, they can quickly increase their market share.
Image: Workers testing the cooling effect of semiconductor cooling chips through a drip test. Photo by Xinhua News Agency reporter Li Xiaoguo.
China is also the world’s largest semiconductor market. According to American market research firm IC Insights, China’s semiconductor market demand has reached $103.5 billion, accounting for 36% of the global semiconductor market, similar to the combined markets of North America, Europe, and Japan. As China becomes the world’s largest electronic product manufacturing base, the demand for semiconductors has skyrocketed.
A semiconductor expert stated: “Although Chinese companies’ semiconductor technology capabilities lag behind South Korean companies like Samsung Electronics and SK Hynix by 2 to 3 years, they have sufficient capabilities to produce semiconductors for low-cost home appliances or smartphones. China will start by capturing the low-cost semiconductor market and gradually expand its market share across the board.”
The Chinese government is also putting detailed plans for developing the semiconductor industry into practice. The most representative initiative is the “Made in China 2025” plan released by the Chinese government in March 2015. The goal of this action plan is to develop the semiconductor industry into a key industry for China’s future, significantly increasing the domestic production ratio of components in electronic product manufacturing facilities. In other words, if one wants to operate an electronic product manufacturing factory in China, they must use semiconductors produced in China.
Emphasizing cooperation and talent acquisition
China plans to reduce the technological gap with South Korean companies through “cooperation” and “talent acquisition” with foreign enterprises. Recently, under government support, Chinese IT companies are engaging in various cooperation projects. The government of Hefei City in Anhui Province has recently partnered with SinoKing Technology, founded by former Elpida president Yoshio Sakamoto.
China’s collaboration with Intel, the world’s leading semiconductor manufacturer, to establish a NAND Flash factory in Dalian is also driven by the same intention, as Intel has broken the unwritten rule of not producing the latest semiconductors outside the U.S. due to concerns over technology leakage. Qualcomm, the world’s largest smartphone application processor manufacturer, has also established partnerships with China’s SMIC and Huawei. China is willing to spend heavily to attract talent.
According to semiconductor industry sources, Chinese companies are offering enticing conditions to attract semiconductor technology talent from South Korea and Taiwan, promising five times the annual salary guaranteed over three years.
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