Insights From Leading Edge



IFTLE 335 Catching Up on China and the Wait for the New Industry Driver

By Dr. Phil Garrou, Contributing Editor

Catching up on some recent stories of great importance to our electronics industry… and thus packaging. 

SMIC urges Taiwan chipmakers to partner with China-based peers

IFTLE readers are well aware that China is in a “no holds barred” battle to become a major player on the IC fab scene. [See for example IFTLE 316 “YMTC and China’s desire for 3D NAND production”; IFTLE 296 “…China the wild card…”]

Digitimes, quoting Tzu-Yin Chiu, CEO of SMIC, now reports that SMIC is urging Tiwanese chip makers and the Taiwan government to collaborate with mainland China electronics peers. [link]

Chiu indicated that “The IC industries in China and Taiwan could team up as a powerful IC industry supply chain globally”, adding that the Taiwan government should enable China based enterprises to cooperate with their Taiwanese peers.” Taiwan IC fabs including TSMC, UMC and Powerchip have indeed taken China government support to set up production on the mainland.

Chiu also disclosed that SMIC has been developing 14nm FinFET chips and will be starting R&D on 7nm s technology in late 2017.

US Dept. of Commerce – “China Poses Threat to US Dominance in Semiconductor Industry”

In a related story, South China Morning Post is reporting that US Commerce Secretary Wilbur Ross sees the US semiconductor industry as still dominant globally but said he is worried that it will be threatened by China’s planned investment binge to build up its own chip making industry. [link]

Ross said that the Commerce Department is considering a national security review of semiconductors because of their defense implications in military hardware and their general proliferation in devices throughout the economy. Ross reportedly called China’s plans for massive state-directed investments in semiconductor manufacturing capacity under its “Made in China 2025” program, which aims to replace mostly imported semiconductors with domestic products, “scary”.

Commerce Department trade data shows that the “Semiconductors and related device manufacturing” category showed a trade deficit of $2.4B in 2016, with exports of $34.1B and imports of $45.6B which includes non-semiconductor devices such as solar cells and LEDs.

Waiting for the New Driver…Impatiently

Bloomberg is reporting Qualcomm Inc. and MediaTek are both showing slowing sales and declining margins as shown below [link].

bloomberg 1

They point out that this is due to a maturing of the mobile phone industry segment and look to “IoT and automotive” to save things, but are impatient for this new drivers arrival “the IoT should be the next big thing for chipmakers. The problem is that this era has yet to fully arrive, leaving them supplying a smartphone market that’s peaked

For a read on Yole”s take on potential IoT applications before Rozalia Beica”s departure, see IFTLE 227 “Yole’s Beica examines Internet of Things …”

IFTLE is a believer in the general concept of IoT, i.e. Rf transfer of data from inanimate objects, but as we have mentioned before we do not see this as a general boon to advanced packaging since such applications will require the absolute lowest priced packaging solutions, not typical of advanced packaging.

IFTLE considers automotive similarly. Certainly there is no question that there will be more and more electronics built into automobiles, but, based on my career at a major chemical company which had other divisions supplying plastics to the automotive industry, I can tell you that supplying the automotive industry is the antithesis of a high margin business for suppliers. Typically automotive business is used to fill he plant (in the industry this is called loading the plant) which in turn generates lower cost per unit volume which can be used to meet the lowball pricing required to get the automotive business while also increasing margins in other applications using the same materials but accepting a higher profit margin for the supplier.

If anyone out there thinks electronics is a tough industry to play in, try automotive!

Hope to see you all in a few weeks at the ECTC in Orlando.

ectc128

For all the latest in Advanced packaging, stay linked to IFTLE…

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One thought on “IFTLE 335 Catching Up on China and the Wait for the New Industry Driver

  1. Dr. Dev Gupta

    to inflate their semiconductor consumption ( and thus entice more tech transfer ) China includes even the chips imported into the PRC ( say from Foundries in Taiwan ) by Contract Manufacturers who assemble phones etc. for non Chinese brands and then export the completed systems out of China for sale outside China by those non Chinese brands. The factor could be as high as 2.5x.

    Reply

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