integrated circuit, IC, semiconductor industry, China, world, global semiconductor, development of semiconductor|Song Shiqiang|Perspectives|Perspectives|
Hello, my dear friends of Huaqiang Lecture. My last name is Song, instead of King included in the company’s name Kinghelm, because many new friends often make a mistake. Huaqiang Lecture is a good place to exchange our thoughts, keep learning and communication with each other. This is the third time for me to give a lecture here. I introduced Beidou antenna and navigation module of Kinghelm for the first time; Slkor SiC for the second time. As a famous economist of Huaqiang North and a hard-working entrepreneur investing integrated circuit by selling my personal apartments, I plan to talk about “Localization Road of Integrated Circuit”. Thanks go to Xu Huimin, the host of Huaqiang Lecture with a nickname of Fatty Brother. Congratulations, Fatty Brother, you’ve lost your weight!
The year 2020 is unusual, with serious pandemic and all-round game between China and the U.S. “Integrated circuit” is the outcome of information era and also the focus of competitions. How can we develop it well to satisfy our domestic demands? This is an issue that need considering.
I will talk about our topic today from 4 parts. The first part is about international background and division of labor of integrated circuit, including the US; Europe, Japan, Korea and our Taiwan; and China mainland.
The second part is about the current status of localization and specific situation of materials, process, design, talents, industrial software equipment and sales.
The third part is about S W O T analysis, including opportunity, strength, weakness and threats of local integrated circuit, so that we could understand status of China’s semiconductor from many different perspectives.
The fourth part is prospect for integrated circuit domestication. I believe we will win after a lot of efforts. It is also the laws of nature and history. Our integrated circuit industry started late and now faces many difficulties. Entering the information age from semi colonial and semi feudal agricultural society in a slow and bewildered manner and our emphasis on social science than natural sciences, we lack scientific thinking, vision and accumulation as the westerners do. A short-term industrial society leads to our unsound industrial system. If oil and steel can be said as the grain of industrial society, “chip of integrated circuit” is staple food of information society. Therefore, we need strengthening our weakness by overcoming many different difficulties. Through 5,000-year sufferings and glories, the Chinese nation featured with resilience and tenacity now forges ahead bravely to rejuvenation. People working on integrated circuit with efforts are actually epitome of the Chinese people of “the nation reborn after tackling much distress”.
International Pattern
As for international pattern, let’s talk about the U.S. first. The U.S. is the single hegemonic power of the world and why? I will explain it from 3 aspects:
Firstly, the formulation and output of technical and industrial standards. Wars along the history were aimed at securing lands and resources by killing people while today’s wars in 3.0 generation are to secure market, talents and benefits. Americans adopted the easiest and most effective method: Grabbing money by formulating and outputting cutting-edging technologies and industrial standards and establishing a series of patent pools. Other countries and companies have to follow its rules. It actually means a kind of scientific and technological hegemony. In terms of standard formulation of LoRa and 5G several years ago, China’s*and Qualcomm of the U.S. competed fiercely and Lenovo suffered severe criticism for supporting American standards. The tech war is just like traditional war because whoever seizes the commanding height will win superior geographical advantages.
Secondly, comprehensive strengthS such as basic research, materials, process, talents, technology, innovation and system including education system. The U.S. has the colleges and universities ranking top 30 in the world, including MIT, Stanford University, University of California-Berkeley and Harvard University. Its education system is leading. Bell Labs of Lucent Technologies also take the lead in research of material and basic discipline as well as cultivation and introduce of talents with leading voice. Basic research actually means theoretical, analytical and experimental researches in math, physics and chemistry, as well as inventing new products after finding laws and new functions and then deducing axiom, theorem and formula. Basic research like grain seeds is related to R&D and production and the US is also outstanding in this aspect. Android OS made by Google is used by*and other smartphones, except for Apple. Windows system of Microsoft is installed in almost every computer of the world and SAAS system of Oracle by most of major companies. All of these are like hoes and forks in agricultural society. As a liberal and democratic society advocating innovation and struggle, America has cultivated many celebrities such as Jobs and Musk as well as leading companies such as GE, Boeing Co., Apple, IBM, Microsoft, Tesla and Amazon to promote social development. It also has innovative Silicon Valley with a high transformation rate of industry as well as Wall Street to support industrialization of science and technology.
Thirdly, a complete high-end industry chain. I had a conservation with Zhou Chengzu, a senior professor of Microelectronics Department, Tsinghua University, via call. We discussed this issue together. There’re two parts that form a complete industry chains with one for scientific research and the other for industry. I said my personal feelings about opportunities after the pandemic with Professor Zhou. The rapid capacity formation of masks, mask machines and ventilators demonstrates our excellent supply and industry chains. However, in terms of vaccine research and material and methods of testing, we still need to work hard to reach America and we need further improving S & T capability. For example, creative design, brands, technology, channels and R&D of Apple are in America while some low-end work such as installation, test, package and logistics is finished in China. Furthermore, with its hegemony in finance, public opinions, oil and U.S. dollar, America could safeguard its S & T hegemony.
Then, I want to talk about Europe, Japan, Korea and*(China). Europe follows American leadership and complements with the US. Europe also has some strength. Interest conflict between them and America is unavoidable so they sometimes have to suffer pressure from the US. Facing conflict of interest, America will pose pressure to Europe properly. ARM of Britain takes the lead in mobile communication (Japan’s SoftBank now) over America’s Intel, the former dominator. Germany’s Infineon, ST semiconductor of Italy and France, former Dutch’s NXP all play a dominant role in various fields. Additionally, Dutch’s ASML, a company to produce lithography machines, has cutting-edge technology and process of EUV, with its products in great demand by*Semiconductor Manufacturing Company (TSMC) and Samsung and its goods ordered by Semiconductor Manufacturing International Corporation (SMIC) in 2018 hasn’t delivered yet.
Let’s talk about Taiwan, China. Taiwan’s FOUNDAY is much better than that of the China mainland.*catches up the world’s second major transfer of technology and industry.*has many talents introduced by the senior figure Mr. Morris Chang from America and therefore it can stand out in the world.*specialized in neutral foundry with customers of Huawei, Apple, Intel and Nvidia. It has the best technology, devices, scale and efficiency in the industry with its only rival of Samsung in Korea. UMC follows the company above. Various small IC design companies around Hsinchu City have shaped a benign ecosystem. For example, MTK, Novatek and Realtek have enjoyed a certain status in the industry.
Then let’s talk about the China Mainland. After receiving the world’s third major transfer of technology and industry chain, we have made a big transformation to the whole industry chain from production and processing module alone previously. We concentrate on fields with higher technology, less environment damage and higher gross profit and replace part-time, clumsy and dirty work gradually. Upon realizing the above, America feel anxious, because it fears that it could no longer get benefits from China. At the same time, we gradually transfer those low-end industries to our neighboring countries. For example, part of capacity of Samsung was transferred to Vietnam and many packaging and testing plants and passive devices to Philippines and Malaysia. The above actually reflects the major trend of fourth industry transfer. Thirdly, we have transformed our production from assembly line to autonomous and intelligent development, from OEM to ODM and from simple and extensive processing to comprehensive development with R & D, design and brand channel. We have also transformed from demographic dividend to talent dividend. Based on large amount of labor force population, talent dividend will become high-quality human resources after around 8 million graduates every year. These talents will be very excellent human resources after receiving professional training and working systematically.
Significant Events in Recent Years
I want to talk about some big events about integrated circuit in these two years. The first thing is America’s purposeful attack on ZTE and JHICC; the second on is rounds of games between China and America and its background; the third is America’s attack against*with its allies.
After Trump taking into the office, America banned the sales of integrated circuit to ZTE in April 2018. ZTE went it through by paying a deposit fine of USD 1 billion after rounds of negotiation by all parties. After the involvement of the US compliance team, ZTE had to adjust its key management post in order to complete the affair. In October, JHICC was included in the list of export control entities. It means high-end integrated circuit devices protected by the US intellectual property would not be sold to us anymore. Therefore, infrastructure and plants built with billions were left idle. In December, the partner UMC withdrew all dram engineers under pressure. JHICC’s work would be in vain if without technology, devices and talents.
The second story is about the game between China and the US. We literally call it game but actually it means the US’s measures against China. First of all, according to Wassenaar Arrangement signed by the US first in1996, the US and Europe stopped providing high-end devices and technology for China. Therefore, the Chinese enterprises, including us, can’t buy devices of high-temperature fire extinguishing and high-pressure ion-exchange, as they are used for processing its main products of silicon carbide MOS field effect transistor. The second-hand devices bought by our peer in Beijing don’t work at all. Besides, according to the requirements of Article 301, a series of crackdown measures will be implemented against you, when you are informed of breaching the provisions regarding dumping or technology in trade with the US. With power of interpretation and “Long Arm Jurisdiction” of Pacific police, America could punish anyone that poses threats on its interests.
As the best foundry in China, SMIC was suppressed for many times and finally its founder Doctor Richard Chang had to leave office. My teacher Zhou Zucheng told me in particular that those including Jiang Shangzhou, Chiu Tzu-Yin, Mong-Song Liang and Zhao Haijun devoted themselves to China’s integrated circuit industry and they are our heroes. Zhou also suggested me to write some articles for eulogizing them. The same problems occurred to Altek, HUAHONG GROUP and XMC as well in their development process.
The third is the attack against Huawei. I’d like to compare the case into the followings: Ren Zhengfei of*is a diligent peasant in Guizhou Province, and he grows grain and buys seeds, chemical fertilizers from Europe and the US. But Mr. Ren further helps the Europe and the US to plant grains, after finishing its domestic business and the profit is higher than that of selling seeds and fertilizers. Ren Zhengfei even contracts their lands at a low price. The above reflects Huawei’s wolf spirit. Upon realizing the above, Trump feels so angry that it starts to implement measures against Mr. Ren. That’s the essential reason of the conflict.
In December 2018, Meng Wanzhou, CFO of*and daughter of Ren Zhengfei was detained by Canada under requirement of America. She was released on bail but could not leave Canada and probably was extradited to America for trial. It essentially means suppression against Huawei’s core leaders.*was not allowed to sell its smartphones in American market and more ridiculously, British declared*5G smart phones could spread virus and were boycotted by Commonwealth countries such as India and Australia. On May 15, the US decided to stop supplying products to*from all aspects after expiration of a 3-month buffer period. America required*to control technical contents of its products below 25% but it decided to suspend supply directly.
*is the representative of China’s tech companies and our pride. It is an amazing company, as it leads the development of China’s integrated circuit and world’s information as a private company alone. We believe*will break the blockade with full support from all Chinese people. I hope more companies like*could emerge in double or even triple times to challenge the world’s cutting-edge technologies and drive the development and prosperity of China. Cheer up, Ren Zhengfei!! Cheer up, Huawei!!!
Targeted Rivals
How’s the competition between our domestic companies and overseas rivals? I’ll explain from 6 parts including materials, EDA equipment, IDM, fabless, foundry, packaging and testing and sale channels.
Materials here mainly mean “silicon wafer” and “wafer”. The requirements of purity and precision are high and they are basic materials of integrated circuit. Japan’s Shin-Etsu and SUMCO, Taiwan’s EMIS and Korea’s LG are all doing better than us. There is a long way to go before reaching foreign leading companies. The leading domestic companies in this sector include ZINGSEMI in Shanghai, AST in Chongqing, Ferro Tech in Ningxia Autonomous Region and SICC in Shandong Province in terms of their technology, quality and mass supply. In terms of auxiliary materials, we have a small gap with foreign companies in frame, target material, packaging substrate, polishing material while a wide gap in photoresist and silicon carbide material. Two years ago, Slkor (www.slkormicro.com ) failed in domestication of SiC materials after rounds of test and had to reuse epitaxial wafer of America’s Dow Corning.
EDA software is the tool we use for designing IC. I consulted teacher Zhou Zucheng who is a top expert in EDA from Tsinghua University this morning. At present, world’s mainstream EDA is controlled by the US capital and the top 3 include Synopsys, Cadence and Mentor with a total share accounting for 80%. Mentor was sold to Germany in 2016 but is still America dominated. In China, Empyrean takes the lead together with Platform Design Automation, Inc. of Li Yanfeng from Tsinghua University (merged by Primarius Technologies Co., Ltd.), Arcas Technologies of Yuan Jun and Xpeedic still at working hard in this field. Domestic EDA accounts for 5% of the total market. Positively speaking, the development potential is huge.
Our IDM and fabless. IDM is vertical development enterprise in the industry chain. It means it finishes the entire process from materials, packaging and testing to sale channels. Samsung, Intel, TI, ADI and Nvidia are included in this type and China’s Silan. Fabless refers to design companies of fabless production and GD, Unisoc, Hisilicon and Will Semicon Co., Ltd. are leading in China’s industry. MCU of GD is excellent but its core is still from Britain’s ARM. However, GD cooperates with NUCLEI in risc-v instruction set, and this is a promising prospect. Unisoc, as result of capital operation of Tsinghua Unigroup led by Zhao Weiguo, has purchased Spreadtrum Communications, Inc. and RDA Microelectronics, Inc. It means the strength of China’s capital that I will talk about later. HISILICON’s chips are mostly designed by America’s EDA and it ranks top 10 in the world. We have to admit that*is a great company. With a high market value, Will Semiconductor is leading in purchase, R & D and technology ecology layout.
Foundry refers to wafer processing companies. Foreign companies such as Korea’s Samsung, Taiwan’s*and UMC, the US’s Global Foundries take the lead in the industry. In China, SMIC does well in this aspect and can produce 14-nanometer products after the state’s investment in capital and introducing high-end talents in struggling chase of foreign companies with leading edge. Good news came several days ago: Wuhan XMC made some breakthroughs in storage, approaching and had reached world’s leading level. In addition, Huahong Group and CSMC Technologies Corporation established jointly with Japanese companies early are making contributions to the development of integrated circuit as well. We should also keep investing more resources in foundry.
Packaging & testing keep the same development pace with the rest of the world and even takes a leading status in some aspects. Leading overseas enterprises include the US Amkor, Singapore’s UTAC Group, Korea’s Nepes and Malaysia’s Unisem. In China, JCET takes the lead and has ranked top scale in the world through its efforts and a series of M & A. Besides, NFME and HT-Tech also have great performance.
Sales channels include major agents, e-commerce and spot traders, such as Beijing’s Zhongguancun Technology Park and Shenzhen’s Huaqiang North Commercial Area. The US Arrow Electronics and Avnet and Taiwan’s WPG Holdings take the lead in this industry. As for e-commerce, Digi-key ranks top with a sales volume of USD 3.25 billion and Mouser Electronics and element14 also perform well in this aspect. China’s enterprises in the industry also make progress steadily. For example, CECport and Huaqiang Group could reach an annual sales volume of over RMB 10 billion and Techtronics also has a rising sales volume. Although core value isn’t in their hands, they also have some say because of information and customer relationship. In domestic e-commerce, szlcsc.com first set up by Yang Linjie and Bo Ge, ICkey.cn by Zeng Ye and Liu Yunfeng and ichunt.com by Chang Jiang and Liang Yao develop rapidly comparing with their targeted rivals of Digi-key. All these bosses are all my good friends. The development of Beidou GPS antenna of Kinghelm (www.bds666.com) and MOS field effect transistor of SLKOR(www.slkormicro.com ) cannot be separated from their assistance. A large number of traders in Huaqiang North can serve small and medium companies well and protect the development of electronics industry as large warehouse and distribution center of electronic components. I often make jokes with bosses from Huaqiang North as well as spread professional knowledge of integrated circuit (to be continued).
Disclaimer: The article was originally written by Song Shiqiang of General Manager of Shenzhen Kinghelm Electronics Co., Ltd. with the help of professor Zhou Zucheng, Wang Zhihua and Zhu Yiwei from Microelectronics Department of Tsinghua University and Wu Bo, vice CEO of szlcsc.com and Mr. Wu Shaowen of ittbank. Thanks go to all of them. For reprint, please follow WeChat account “SiC expert”.
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