China’s semiconductor project to mass produce by 2019

By Chen Qingqing Source:Global Times Published: 2017/3/14 22:58:39

Firm can achieve technological breakthroughs by narrowing focus: experts

Workers manufacture chips at a factory in Zunyi, Southwest China's Guizhou Province, in February 2016. Photo: IC

A $24 billion chip project in Wuhan, Central China's Hubei Province, is expected to begin mass production in the next few years, which represents a breakthrough point in the country's semiconductor industry in spite of its slow progress, industry insiders said on Tuesday.

Almost a year after Wuhan Xinxin Semiconductor Manufacturing Corp (XMC) held the groundbreaking ceremony for memory chip production base Yangtze Memory Technologies Co (YMTC) in Wuhan with a total investment of $24 billion, the company has worked to catch up with its competitors in Japan and South Korea, as China has little experience in marking memory chips, Wang Yanhui, head of the Shanghai-based Mobile China Alliance, told the Global Times on Tuesday.

YMTC has become a national base for semiconductor production, according to the company's website.

"The demand from domestic electronics manufacturing has driven up the prices for flash and DRAM memory chips in the past few months. Some products like flash memory chips are still dominated by companies like Samsung, Toshiba and Micron Technology," Wang said. 

After two years of decline, the memory market is expected to grow 10 percent year-on-year in 2017, according to a report released by the global industry consulting firm IC Insights in December 2016. The growth momentum will be driven by the increasing prices for DRAM and NAND flash, two major memory chip products, the report noted.

The integrated circuit market, which is separated into four major sectors - analog, logic, memory and microcomponents - will see a compound annual growth of 7.4 percent to $109.9 billion in 2021, led by the rapid growth of the memory category, IC Insight's report showed.

The first phase of production at YMTC is expected to be aimed at making NAND flash chips, which have huge potential with an estimated memory market share of more than 50 percent worldwide by 2020, Xu Xiaohai, senior analyst in the semiconductor industry research division at CCID Consulting, told the Global Times on Tuesday.

"It might be easier for Chinese companies to make technological breakthroughs if they focus on one specific domain," Xu said.

He noted that the corporate strategy is also in line with the country's resolve of making progress in the semiconductor industry.

The Chinese government has been urging the creation of a self-sufficient semiconductor industry in recent years, and it has announced investment up to $50 billion in related projects in the country, according to the multinational industry association Semiconductor Equipment and Materials International.

"It takes time for government-backed projects like YMTC to get ready for mass production, particularly as the company lags behind other semiconductor manufacturers overseas in terms of core technologies," Wang noted.

XMC prefers not to speak to the media at this moment as it wants to keep a low-key profile, a person familiar with the matter told the Global Times on Monday.

Channeling more capital into the semiconductor sector, especially into memory chip production, is the right direction, as DRAM and NAND chips are highly used in electronics products, not only in PC and smartphones, but also in the IoT [Internet of Things], said Chen Feng, vice president of Chinese fabless semiconductor market Rockchip. 

Shifting strategy

Facing tough competition, YMTC is likely to record losses in the earlier stages of production, despite the local government's support, Chen noted.

The company has shifted its corporate strategy from shipping chip products to staying more focused on memory chips, he said.

Since teaming up with foreign companies in the memory chip sector, such as US firm Spansion, YMTC has been working more on memory technology, according to the Chinese company's website.

In addition, Tsinghua Unigroup merged its memory chip-making operations with XMC, creating a $2.8 billion company to spearhead the country's effort to become a global semiconductor player, Bloomberg reported in July 2016.

"The production base involves various investors as well as industry funds such as China Integrated Circuit Industry Investment Fund and Hubei Science & Technology investment Group Fund which represent the country's efforts in allocating resources for the semiconductor sector," Xu said, noting that although Samsung, SK Hynix, Micron, Toshiba occupy most of the market share, China has a huge market space for Chinese enterprises to achieve profits sooner or later.

"The M&A changes also open opportunities for Chinese chipmakers to become the game-changer one day. Particularly as rival Toshiba has encountered difficulties in operations and intends to sell its semiconductor unit." Xu added.

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