http://semiengineering.com/chinas-capital-equipment-market-to-boom/
China’s Capital Equipment Market To Boom
The country’s “Made in China 2025” plan should benefit equipment suppliers, foreign and domestic.
August 18th, 2016 - By:
Jeff Dorsch
The worldwide semiconductor capital equipment market declined 3% last year to $36.53 billion from 2014’s $37.5 billion, but inside China the story was significantly different.
Capital equipment sales there increased by 12% in 2015, to $4.9 billion.
In fact, only Japan showed a higher growth rate last year, of 31%, according to figures from
SEMI and the Semiconductor Equipment Association of Japan.
Of course, it should be noted that China (Mainland) was the 5th-largest market for semiconductor production equipment during 2015, trailing Taiwan, South Korea, Japan, and North America (US, Canada, Mexico), in that order. Still, the potential market growth for China is tremendous, owing to the “Made in China 2025” plan adopted last year by the national government.
China’s trade deficit in chips is currently about $150 billion a year. The country is the world’s largest importer of semiconductors due to its sizable industries in consumer electronics and contract electronics manufacturing, fed by dozens of outsourced semiconductor assembly and testing (
OSAT) companies.
The 2025 plan calls for China to bulk up in all areas of chip design and manufacturing – more IC design firms and fabless semiconductor companies, more silicon foundries, more manufacturers of logic and memory chips, more OSATs, and more vendors of semiconductor capital equipment. The goal is to reduce the country’s severe dependence on chips and semiconductor manufacturing equipment from abroad.
In recent years, the government has subsidized production of light-emitting diodes for lighting systems, backlighting for LCD televisions, and other applications. It felt constrained by the fact that most of the metal-organic chemical vapor deposition (MOCVD) reactors used to make LEDs in China were supplied by
Taiyo Nippon Sanso of Japan, and
Aixtron of Germany. The PRC government has, in turn, encouraged the domestic development of MOCVD reactors — not entirely cutting off Taiyo Nippon Sanso and Aixtron — but providing an alternative supply chain for the crucial LED manufacturing equipment.
Technavio forecasts the LED production equipment market will enjoy a compound annual growth rate of more than 5%, reaching $1.5 billion in 2019. The Asia-Pacific region accounted for 86% of the LED production equipment market in 2014, the market research firm estimates, and it will increase that share to more than 88% in 2019. China will be among the countries benefiting from such growth, according to Technavio.
China has been highly active in acquiring overseas chip companies and capital equipment vendors, while reorganizing its domestic semiconductor manufacturing for greater efficiency. A dozen or more new wafer fabrication facilities are under construction in China, with eight of them devoted to foundry services, according to Sam Wang, a research vice president at Gartner.
Tsinghua Unigroup, a government-backed entity affiliated with Tsinghua University, last month took over majority control of Wuhan Xinxin Semiconductor Manufacturing (XMC), a producer of NOR flash memory devices and CMOS image sensors that also offers foundry services. Tsinghua Unigroup formed a new holding company for XMC called Yangtze River Storage Technology, of which it owns more than 50%.
XMC previously received national funding of $24 billion to build and equip a memory chip fab.
Some of China’s new fabs were built with the cooperation of foreign chipmakers, principally Samsung Electronics, and SK Hynix, which are making 3D NAND flash memory devices and other memories.
VLSI Research late last month perceived an industry “upturn” in global semiconductor sales.
“Conditions have been steadily improving across the board in Memory, Foundry, IDM, SoC, and IoT markets with demand out of China being particularly hot with smartphone penetration on the rise,” the market research firm noted.
“Why is China investing in the semiconductor industry?” asked Jim Walker, a research vice president at Gartner, at last month’s SEMI/Gartner Market Symposium in San Francisco. The main aim, he said, is “lowering the trade deficit.” He added, “They want to make their own semiconductors because they make all the electronics products.”
While memory fab and foundry construction is proceeding apace in China, the country continues to invest in OSATs and semiconductor assembly and test services in general, due to the lower costs of equipping IC assembly and test plants, compared with fabs.
The U.S. Department of Commerce’s International Trade Administration wrote in a report this year,
“All of this fab building and other upgrades/equipment purchases will result in a significant uptick in Chinese purchases of semiconductor manufacturing equipment from 2016 to 2018. Fab construction spending in China is expected to slow down in 2017, which may result in a pause in the increase of semiconductor equipment spending in 2018 to 2019, but the general trend will still be upward. China also buys a significant amount of machinery for outsourced semiconductor assembly and test (OSAT). China represents 27% of the world’s floor space for OSAT.”
Gartner’s Walker noted the APAC dominance in OSAT dates back to 1962.
“There is no high-value packaging in the U.S.,” he noted. “The last plant closed a few years ago.”
China has put a lot of effort into building up Jiangsu Changjiang Electronics Technology (JCET), now the country’s largest provider of IC packaging and testing services, and the fourth largest OSAT provider in the world, behind Taiwan's Advanced Semiconductor Engineering (ASE Global), Amkor Technology, and Siliconware Precision Industries. JCET last year acquired STATS ChipPAC, vaulting the Chinese company into the top ranks of the OSAT/SATS industry. The company was formed in 1972 as the Jiangyin Transistor Factory.
“Other countries are threatened by China’s semiconductor goal,” Walker asserted. The U.S. Bureau of Industry and Security, another Commerce Department agency, estimates that 43% of companies engaged in original design manufacturing and SATS will be based in China.
He concluded, “Take actions in China now, as your competitors already have.”
thanks for the OP "Kind Concern"
