HALF MOON BAY, Calif. — China is expected to invest this year half the $20 billion fund it set aside to grow its semiconductor industry. As much as 70% of it is expected to target its domestic wafer fabs.
The initiative is the latest of several failed attempts over the past 25 years to make China a significant producer of chips. This time around the government is taking a more market-oriented approach that will give it a better shot at success, said one executive bidding for as much as half the funds.
"It's not clear if the new scheme will work, but I think it's the right direction," said Simon Yang, chief executive of XMC, one of China's two 12-inch fabs that hopes to get as much as $10 billion.
China imports as much as half the world's chips but produces less than 10% of them, an expensive gap state planners want to narrow. Since 1990, the government has bankrolled major chip efforts about every five years, spawning at least a half dozen fabs to date.
"So far you do not see any of them that can grow sustainably by themselves, meanwhile Taiwan and Korea have grown into powerhouses of advanced wafer manufacturing," said Yang in a talk at the Industry Strategy Symposium here.
Past attempts failed in part because state planners who funded them were too slow to make decisions and take risks needed to launch a chip factory. In addition, the funds were often spread too thin across many provincial projects.
"The objective this time is to focus the money in a few companies and locations," Yang said, although decisions on who gets what when have not yet been made.
In addition, the new approach focuses on letting professional managers control projects responding to market forces. In the past, the projects were sometimes beholden to committees of political leaders. However, the current fund insists upon 6% to 8% returns which may be difficult for the notoriously cyclical chip industry.
Next page: Targeting nex-gen memories and IoT chip stacks
China's fabs have not kept pace with its fabless designers and packaging companies.