Remember when China's rise to become a semiconductor manufacturing powerhouse seemed inevitable? That hasn't exactly panned out.
In the 2000s, a number of indigenous Chinese foundries, including Semiconductor Manufacturing International Corp., sprang to life. With China's relatively low labor costs and a steady flood of new engineers being churned out by Chinese universities, many believed that it was only a matter of time before the bulk of semiconductors were made in China.
Last year, on a value basis, chips made in China accounted for only about 3.5 percent of the $292 billion global chip market, according to market research firm IC Insights. China-based IC production is forecast to rise to $20 billion by 2017, but it will still make up only about 5.6 percent of the forecasted 2017 global chip market value of $359.1 billion, according to a mid-year update to the firm's 2013 McClean Report, set for release at the end of this month.
What's more, most of the chips built in China are being built by fabs set up by foreign companies, not indingenous Chinese foundries or IC vendors. According to the IC Insights report, 58 percent of IC production in China last year came from fabs owned and run by companies based outside of China, including Intel and SK Hynix. With Intel continuing to ramp up its 300mm fab in Dalian and Samsung set to build a 300mm fab in Xian, that percentage is expected to rise to 70 percent in 2017, according to the report.
"Most of the production in China is Intel, Hynix, and soon to be Samsung," said Bill McClean, president of IC Insights, in an interview with EE Times.
According to McClean, the Chinese government did everything it could to create a vibrant, home-grown semiconductor manufacturing industry, including fast-tracking permits and granting substantial tax holidays to the likes of SMIC, Hua Hong, Grace Semiconductor, and others. "I think they had their shot at it and it really hasn't worked out for them," McClean said.
Facing stiff competition and technology hurdles, the indigenous Chinese foundries have had a tough time gaining meaningful marketshare. SMIC, which IC Insights currently ranks as the world's No. 5 foundry by sales, is at least two years behind market leader TSMC in process technology, McClean said. SMIC's 2012 sales of about $1.7 billion were less than one tenth of TSMC's $17.2 billion, according to IC Insights.