Could China contribute to the next semi downturn?
09/01/2001
Meg Villeneuve
CHINA--It's estimated that China currently has close to a dozen fabs ready to start pilot testing. Each fab contains an estimated 8,600 to 107,000 square feet of cleanroom space. While those fabs are not adding to the current overcapacity issues, looking ahead some believe China may be a contributing factor to the next downturn.
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Analysts predict it will take China a couple of years to ramp up, and once it does that region will become more competitive. "I can easily see this geographical segment being one of the catalysts for the next downturn, as it builds capacity based on competition and internal growth needs-just like South Korea in the mid 1990s," says SG Cowen Analyst Tia Min Pang.
One year ago, Semiconductor Equipment and Materials International (SEMI) estimated that the China semiconductor equipment market would reach $4 billion by the year 2003, however that's not the case (see chart.) This year China is expected to hit the $4 billion mark and in 2003 SEMI says that market may reach $7 billion.
Market researchers GartnerGroup predicts that in 2001 there will be steady growth of the semiconductor industry in China even though the rest of the world is experiencing a downturn. "China's IC industry is expected to grow to $13.6 billion this year, up from $12.8 billion last year. This is in strong contrast with the outlook for the rest of the world's IC market where a 17 percent decline is expected for 2001," according to SEMI's China Equipment newsletter.
"They are coming to critical mass. [China] is now building momentum and emerging as a [viable] market," says SEMI CEO Stan Myers. China's PC market is estimated to be the third largest and is expected to grow 25 percent in 2001, according to SEMI.
"Demand is so strong for ICs that the country will not be impacted by the semiconductor downturn plaguing every other country in the 2001-2002 period. Tied to the surging market will be strong demand for processing equipment. The semiconductor equipment market was less than $500 million in 2000, but will exhibit nearly a 30 percent growth rate through 2005, significantly better than any other geographic region," notes Robert Castellano, president of The Information Network (New Tripoli, PA.)
One of the biggest challenges facing that region besides a trained workforce is the infrastructure. "Technical talent is a problem everywhere, but of course, China has an advantage with a population of 1.3 billion people. Infrastructure will be a [big concern.]. This is one of the reasons why companies are grouped in certain cities, for example, Beijing, Tianjin and Shanghai," says GartnerGroup Analyst Dorothy Lai.
With the export restrictions into that region, analysts say it will be difficult to get 300 mm equipment shipped to China, which is why a majority of the fabs are 200 mm. Even if the wafers are 200 mm and the fab chooses to go from 0.18-micron design rules to 0.15-micron, it will yield 44 percent more chips per wafer. Change that from 0.15-micron to 0.13-micron, and you've now increased your chips by an additional 33 percent. The biggest jump comes from 0.13-micron to 100 nanometer, which will produce 69 percent more chips per wafer, without changing to 300 mm, according to Pang.