China faces an uphill battle in its push to become the global leader in computer chips because of a lack of technological know-how and talent, according to an analysis by Bain & Co.
China is one of the world’s largest consumers of semiconductor devices thanks to its manufacturing might, and is planning to spend more than US$100 billion to also become a premier supplier to the planet.
The global consultancy estimated that by 2020, almost 55 percent of the world’s memory, logic and analog chips will flow to or through the country. However, the vast majority of the microchips that act as the brains of products like Apple Inc’s iPhone are largely imported from companies like Intel Corp and Samsung Electronics Co.
The Chinese government in 2014 moved to change this with plans to invest more than US$100 billion and become a leading global player.
It has also driven consolidation among domestic suppliers to maximize its investments, including the US$2.8 billion merger of Tsinghua Unigroup Ltd (清華紫光) and Wuhan Xinxin Semiconductor Manufacturing Corp (武漢新芯集成電路) announced last month.
China’s efforts to build a world-leading semiconductor industry are part of a broader effort to wean itself off foreign technology.
However, financial investment will not be enough to buy leadership of the semiconductor sector, which is worth about US$1 trillion according to Singapore-based Bain partner Kevin Meehan.
The country currently makes just 15 percent of the semiconductors it consumes, Bain said in a report.
By 2020, Bain expects Chinese-based plants to produce just 7 percent of the world’s microchips, barely up from current levels.
“China is coming at it in a pretty smart and intelligent way, but I don’t see a path for them to own leading-edge processor technology and that is the foundation of Intel, the foundation of Samsung’s success,” he said.
Efforts by Chinese companies to buy rivals with intellectual property in the processor and memory markets have run afoul of regulators around the world.
Plans for a US$3.8 billion investment in Western Digital Corp were scrapped amid a US security review and investments in Taiwanese chip companies face regulatory obstacles and have stoked political tension.
“Assuming they can spend it all, the biggest risk is that they end up with a whole bunch of fragmented and weak follower positions,” Meehan said.
“There’s ways for them to have influence over greater than 10 percent if they’re partnering well, but otherwise I think you’re essentially capped there,” he added.
Meehan said China’s semiconductor makers could eventually learn from partnerships with global giants and become one of the larger suppliers of key components like computer memory.
Both Intel and Qualcomm Inc have agreed to build semiconductor fabrication plants there in partnership with local providers.
“If you take a long view — not five years, but decades — then certainly you’d have to believe there’s some absorption, but people are careful not to put their leading-edge IP [intellectual property] in China,” he said.
“I don’t see a way to get there without licensing or buying,” Meehan added.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is