By Bob Haavind, Editorial Director
Everywhere at the recent SEMICON Europa event in Munich, Germany, there was talk about China’s impact on the industry. With a backdrop of Chinese demonstrations against Japan during the show week, along with chest-thumping by government officials on both sides, there was concern about future stability in that region, as well as potential tough competition from China in advanced chipmaking.
“We’re just handing it to them,” commented one European tool company executive, reflecting the theme of many discussions that the China market is quickly realizing its potential as a powerful and still-growing force in the industry.
An American executive working with a European company suggested that lagging interest in technology by students in the US, while the number of technology graduates in China is surging, could spell big trouble for the US in the future. “It will only take one lost generation [in technology], and the game is over,” he suggested.
Seeing China as an opportunity rather than a potential threat is the position taken by Peter Podesser, CEO of Austria’s EV Group, who worked as an executive in China for several years. “The biggest risk is not to be in China,” he said. He believes that China will not remain the low-cost producer for very long, pointing out that there are already double-digit rises in labor costs.
“First the workers walked to the cities in black outfits; they moved up to synthetics and bikes; then to motor bikes; and now to good suits and cars,” Podesser explained.
The latest five-year plan, in his view, reflects a realization by China’s leaders that it will not become the global leader in 300mm wafer processing. Instead they plan to pump up research programs in areas like nanotech and biomedical technology, with MEMS-driven life sciences projects. As an example, he cited Tsinghua U. in Beijing for choosing top-of-the-line tools for nanotech research.
Podesser agrees there are still problems with China in areas such as intellectual property (IP) protection. There are national laws to protect IP, but he sees the trouble coming from local judges. There are occasional crackdowns on copycat producers, and the gray market may disappear in that region for a few weeks, only to re-emerge later.
Still, he sees China becoming a strong manufacturing base over the next few years, but much of the investment will be in moving upscale and toward export markets rather than pushing to become a leader in advanced chipmaking.
SEMI president Stan Myers is concerned that a real estate bubble is developing in China, as happened in Japan more than a decade ago, leading to years of stagflation. A SEMI group toured the Shanghai area recently, and Myers cited an example of a young engineer and his wife, both working, with a combined salary of somewhat over 70,000 yuan (about $8500) a year. That income can’t support their lifestyle, including a plush apartment and a new Mercedes, he believes. While China has been a very strong market for tool and materials vendors, the fab buildup could be stalled if a bubble did develop.
He also is optimistic that eventually Applied Materials will be able to get Export-Import (ExIm) bank backing for a loan of several hundred million dollars for process tools ordered by SMIC in China. The head of the congressional committee that passes on such loans is from Idaho, he explained, and Micron has opposed any government backing of offshore chip fabs. The loan request has been bottled up in Congress as a result, and hasn’t even gotten to the ExIm bank for consideration (see WaferNews, V12n9, Feb. 28, 2005). He believes it will be approved if it does reach the bank.
While the China fab buildup has slowed down recently, the talk about its potential as an eventual superpower in the chip industry hasn’t. — B.H.