China's IC imports jump despite design house explosion

SAN JOSE, Calif. — Despite the proliferation of IC design houses in China, the nation's chip imports are increasing, according to the top executive at silicon foundry provider Semiconductor Manufacturing International Corp. (SMIC).

The data indicates that China is becoming more dependent on foreign semiconductor companies as a source of supply. For years, however, the Chinese government has been trying to reverse that trend and make the nation less dependent on foreign IC makers.

In the past, China had to import about 80 percent of its semiconductors from foreign sources, according to analysts. The remaining portion is made by chip makers in China, they said.

In 2004, China is expected to import 83 percent of its ICs from foreign sources, said Richard Chang, president and chief executive from SMIC (Shanghai), during a presentation at the Taiwan + China Semiconductor Industry Outlook 2004 conference here earlier this week.

However, that figure could be much larger. Market research house iSuppli Corp. believes that China will import 90 percent of its ICs from foreign chip makers this year, Chang said. "The demand and supply gap is getting larger, where China would have to import (more than) 80 percent of ICs," he said.

Despite the distressing trend for the Chinese government, the nation is still becoming an important one-stop shop for IC design services, chip packaging and foundry manufacturing. In fact, China's development mirrors that of Taiwan, it was noted.

"Mainland China has almost become the supply chain of the world," Chang said.

Not long ago, China only had one 8-inch fab. Now, the nation boasts nine 8-inch fabs and one 300-mm plant. SMIC owns and operates the 300-mm plant in Beijing.

China may now have as many as 600 IC design companies. There were 96 in 2000 and 200 by the end of 2001. In total, China's IC design industry is projected to grow from $129 million in 2000, to $542 million in 2003, to $913 million in 2004, Chang said. By 2008, China's IC design industry is projected to reach $3.5 billion.

"We see a lot of assembly and test companies outside of China come into China," Chang added. ASE, Amkor, Stats ChipPAC Ltd. have or will separately set up backend operations in China. By 2007, China is expected to take 30 percent of the world's IC-assembly and test industry in terms of market share, he said.