China's chipmakers plan to ramp up seven new 200mm-wafer fabs next year and have
another three fab shells waiting in the wings, leading analysts to ask if the
expansion will add to global overcapacity or be sopped up by China's seemingly
insatiable appetite for electronics content.
While other IC suppliers are cutting capital investments, China's are asserting
themselves for the first time on the global stage.
The list of projects is extensive. Two privately held companies -- Grace
Semiconductor Manufacturing Corp. (GSMC) and Semiconductor Manufacturing
International Corp. (SMIC)-- have entered the fray, with SMIC expected to ramp up
production of two 200mm-wafer plants next year.
Advanced Semiconductor Manufacturing Corp., Beijing Semiconductor Corp., and
Shanghai Belling are slated to open one fab each with the help of investments
from the Chinese government, while Motorola Inc. is responsible for the seventh
fab, a long-awaited plant in Tianjin.
The plants will join China's first 200mm-wafer fab, owned by
Shanghai Hua Hong NEC Electronics Co., which is now expanding the facility.
Further out, Beijing's Shougang NEC Electronics Co. is building a fab shell but
hasn't decided when to install production equipment, while Taiwan Semiconductor
Manufacturing Co. Ltd. is awaiting approval from the Taiwanese government to
build a 200mm-
wafer fab near Shanghai.
The onslaught of new plant capacity has witnessed only one notable casualty to
date, Huaxia Semiconductor Manufacturing Co., which scrapped its fab plans in
Beijing upon failing to secure an investment partner.
With the exception of Motorola's Tianjin fab, which has been marked for wireless
telecom chips, China's new breed of chip companies will operate as foundry
providers. And there lies both the challenge and the opportunity,
according to Joanne Itow, an analyst
at Semico Research Corp., Phoenix.
"Since many of these foundries have only 0.25-micron-capable production lines,
it may be difficult for them," Itow said, particularly as customers migrate to
more advanced processes.
Serving local demand
China's semiconductor demand is blitzing at a compound annual growth rate of
more than 25%, according to the U.S. Information Technology Office in Beijing.
However, domestic fabs this year will supply only 10% to 15% of the chips
consumed in China, said Chris Chang, a senior fellow at SMIC.
Because of that, analysts said that demand for domestically made semiconductors
is great enough that a local supply base could succeed despite the influx of
Moreover, China's foundry players are not necessarily under pressure to deliver
a quick return on their investments. That in turn may allow them to exert price
pressure on components manufactured at 0.25 micron and above, such as
mixed-signal and analog ICs and components geared for certain consumer
electronic and telecom applications.
"The Chinese have a long-term business strategy," said Len Jelinek, an analyst
at iSuppli Corp., El Segundo, Calif. "They are willing to wait three or four
years for the foundries to establish themselves."
Even so, Jelinek expects revenue from chips made in China to grow from $2.9
billion this year to $9.1 billion in 2006.
Technology grab bag
While most of the new capacity will be in the range of 0.25 micron, a few of the
more advanced plants will scale below that. GSMC of Shanghai, for example, will
offer linewidths as fine as 0.15 micron and will migrate to 0.13 micron as early
as 2004, according to executive vice president Daniel Wang.