The emergence of new design capabilities in China has also created opportunities for foundries and EDA tool vendors, whose representatives gathered here this week for the China ICCAD Federation's annual meeting. Underscoring the industry's growing importance, Vice Minister Qu Weizhi of the Ministry of Information Industry became the first senior government official to attend the meeting.

More than 60 Chinese and foreign companies sent representatives to ICCAD. Most reported progress in establishing design capabilities in China, which has been courting foreign firms to set up facilities where Chinese engineers can be trained. In return, some companies have received favorable terms for locating in this economic development zone near Hong Kong.

Since launching its Project 909/Hua Hong design initiative, the Chinese government has invested nearly $100 million to create an indigenous IC design community. That investment is beginning to bear fruit.

China IC Design Center (Beijing) reported at the ICCAD meeting that it has begun development of its own reuse tool at its Chinese and U.S. facilities. The development work is expected to yield Chinese-controlled intellectual property, long a goal of the industry. Elsewhere, Shenzhen State Microelectronics Co. Ltd., another Hua Hong design house, reported on the development of an MPEG-2 decoder and other IC designs.

Multinational companies are also making a concerted effort to enter the Chinese design market. Motorola Inc. recently opened its Shuzhou IC Design Center, and Taiwanese memory and logic maker Mosel Vitelic Corp. recently acquired Nortel Semiconductor Design Co.

Meanwhile, local design teams are improving, observers said. Huawei Technology Co. Ltd., based here, China's top telecommunications equipment manufacturer, is developing growing expertise within its R&D group. Huawei's design center has developed a variety of advanced tools that have sold widely here, and more than 160 Huawei engineers are working on ASIC and pc-board designs. So far, the company has generated 10 ASIC designs used in Huawei systems and is working on 20 others.

"Every design is really market oriented," since it must comply with existing process technologies and other market considerations, said Zheng Lee, chief engineer of Huawei's fundamental department.

Leading EDA tool vendors reported significant growth in the Chinese market over the last year. They also predicted continued growth at the end of the government's current five-year economic plan. Avanti Corp. (Fremont, Calif.) arrived in China this year, investing $3.1 million to establish a design facility in Shanghai focusing on design software for the global market.

Sources said several local design houses plan to spend more than $1 million each to adopt Avanti's deep-submicron tools.

Cadence Design Systems Inc. (San Jose, Calif.) estimated its Chinese sales will grow by 50 percent in 1999. The company's ASIC, system and high-speed pc-board design tools have fared best here.

Mentor Graphics China, an early entrant to the Chinese market, reported a threefold jump in sales in 1999. Driving the growth was demand for tools for high-speed pc boards, design for test and ASIC design. Executives from Mentor Graphics also predicted the Chinese EDA tool market will continue to grow over the next two years, led by continuing government investment and increased demand for low-end tools.

Synopsys (Mountain View, Calif.) also said it exceeded its sales targets during the fiscal year ended Sept. 30 for its Cossap, synthesis and other tools. Telecommunications design houses led the demand for Synopsys tools, but company executives declined to reveal exact sales figures. Synopsys said it remains bullish about the Chinese market because many of its customers are private Chinese design houses and subsidiaries of foreign companies rather than state-owned enterprises.

Foundries rising

Foundries including Shanghai Hua Hong-NEC, CSMC-HJ (Wuxi, China) and Huayue (Shaoxing, China) have also been promoting their production services to local design houses. They are offering a variety of process technologies along with tariff-free wafers and quick deliveries.

Hua Hong-NEC began volume production of 64-Mbit SRAMs in September using its 0.35-micron process technology on 8-inch wafers. It plans to expand production to 20,000 wafers per month by the end of next year. The Chinese joint venture with NEC Corp. has also adopted new process technology for logic, and will begin using another EEPROM process technology in 2000.

An executive with the joint venture said it will begin accepting foundry business next April. Production capacity is expected to jump from 4,000 to 10,000 wafers a month by 2001. The foundry business will include production of microcontrollers, gate arrays and EEPROM-based smart cards.

CSMC-HJ, a joint venture among China, Taiwan, Hong Kong and Chinese American investors, opened its foundry business last December, operating 5- and 6-inch lines based on 0.5-micron process technology. The venture's low production prices have attracted many local design houses. More than half its monthly production of 15,000 wafers goes to local customers.

Huayue purchased a 5-inch bipolar manufacturing line from Fujitsu that's dedicated mostly to analog designs like power devices and RF chips.

Despite the range of foundry services available to Chinese designers, many seem unsatisfied with them. An industry source said design houses are pressing the government to invest in a new full-custom foundry. So far, the government hasn't said whether it will comply with the industry request.