As an industry highly dependent on global collaboration, the semiconductor industry has been seriously damaged by multiple factors such as the epidemic and geopolitics in recent years, and China's semiconductor industry based on globalization is facing severe challenges. How to establish an effective strategy to deal with it? How to make good use of China's huge market so that partners in the global semiconductor supply chain can benefit together? A series of key questions are worth considering.
How much will the US advanced chip embargo affect Chinese companies?
At present, the IT infrastructure system we are familiar with, from the underlying computing equipment (servers, PCs), network infrastructure, to the middle layer operating system/platform, cloud services, and then to the topmost application, are built on the global unified ecosystem, memory, interface, communication, artificial intelligence applications, etc. also use global unified standards, which also makes chips become the infrastructure supporting the IT industry and digitalization.
However, since the beginning of the Trump era, in order to curb China's development, the United States has imposed various forms of sanctions and embargoes on China's chip and high-tech industries - from the beginning of putting specific Chinese technology companies on the entity list, the so-called "embargo on technology products with more than 5% US technology content", to implementing a high-performance computing export ban on specific high-performance computing chips; and the introduction of advanced chip-related export bans, covering all domestic advanced chip manufacturing (including international companies' factories in China), and then attracting allies such as Japan and the Netherlands to implement semiconductor equipment export bans, the intensity and scope are continuing to escalate.
"What the United States has been talking about 'deglobalization' and 'de-risking' is actually trying to kick China away under the condition of globalization. Therefore, for China, the most basic and serious problem now facing is the chip problem. Sheng Linghai, vice president of research at Gartner, said that although this has promoted China's local chip industry to a certain extent, as far as the current situation is concerned, considering that China's chip industry is still in a relatively weak position in the world, "lack of sufficient voice" is the practical difficulty we have to face.
For example, in the 2022 "Global Semiconductor Chip Market Size and Major Manufacturers Ranking", the top 20 companies are all companies from Europe, the United States, Japan and South Korea, and in terms of global share, all Chinese mainland companies together account for only about 7.6%.
Look at China's dependence on the global chip supply chain from another perspective. In 2022, the global semiconductor market procurement scale will be about $600 billion. Among them, the amount of chip procurement in countries outside China is 238 billion US dollars (accounting for 40%), the chip procurement amount of Chinese factories of multinational enterprises is 213 billion US dollars (accounting for 35%), and the chip procurement amount of Chinese enterprises is 149 billion US dollars (accounting for 25%).
If you look at the products by product, as shown in the figure below, China's semiconductor industry has a certain market voice (market share>) in the fields of discrete devices (20%), image sensors (17%), TDDI (21%), LED (20%), analog (11%), non-mainstream memory (23%), non-optical sensors (13%) 10%)ï¼› Special chips required for mobile phones, automobiles, smart homes, and tablets, such as RF/DDI/PMIC/MCU/wireless/baseband, etc., the market share of Chinese enterprises is about 5%-10%; In the "old and difficult" fields such as GPU, FPGA, DRAM, MPU, AND NAND, THE SHARE OF Chinese companies is less than 5%, or even only 1%.
How to formulate chip supply strategies to cope with the future Sino-US competition
In order to reverse the unfavorable situation as soon as possible, since the introduction of Trump's policy, the Chinese government has begun to promote the development of the semiconductor industry with greater efforts, including a series of support policies including large funds, local funds, science and technology innovation boards, industrial subsidy policies, independent and controllable requirements, and a new national system, and local chip manufacturers have also achieved a number of results, such as process development below 14nm, 3D NAND, mainstream DRAM, independent microprocessors, mature chips, automotive semiconductor introduction, etc. Chip application companies have made breakthroughs in the fields of supplier spare tire strategy, domestic supplier certification, chip design, and independent ecological chain development.
Sheng Linghai emphasized the importance of "autonomous and controllable system", believing that it is a key link to open up the entire IT system supply chain. The "IT system supply chain" mentioned here covers many fields from core chips, operating systems, to system integration, equipment manufacturing, basic software, storage systems, to standard certification, network security, network services, Internet platforms, cloud services, application software and so on.
"Only through continuous software and hardware running-in, it is meaningful to integrate application scenarios and suppliers to cultivate the entire ecosystem." He said.
On the other hand, the choice of technology direction under sanctions and embargoes is also very important, especially in the case of high-end advanced processes being "stuck", how to do a good job of software optimization, chip-level innovation, and finding specific applications is very critical. The figure below is the "influence radar map" of the "semiconductor" and "electronics" industries, and Gartner has selected some technical directions that may break through the ban and achieve results: ARM general-purpose processor, heterogeneous integration, RISC-V architecture processor, high-performance persistent memory, chip optical interconnection, 3D DRAM, three-dimensional chip stacking.
Sheng Linghai pointed out that chip companies have three different ways to build independent chip capabilities and the scale of investment required: 1. Strengthen cooperation among domestic reliable chip manufacturers; 2. Invest in potential chip design companies; 3. Self-built chip design and related teams. However, each method also has corresponding drawbacks, such as how to judge the priority of cooperation in the first model? In the second model, do you need to distinguish between financial investment and strategic investment? The third model requires a lot of capital and manpower investment, etc., and needs to be carefully discussed for different products and fields before deciding the direction.
He hopes that domestic semiconductor chip vendors, electronic equipment manufacturers, cloud infrastructure providers and digital business providers can "establish a domestic development ecosystem through upstream and downstream collaboration in the industrial chain" and empower each other. After all, building a self-built ecosystem is a very difficult thing, and for many chip startups, it is unrealistic to expect a chip to immediately "kick NVIDIA and punch AMD".
To this end, Sheng Linghai put forward the following six points as a backup option for the establishment of domestic IT systems:
- Collaborate with IT systems and supply chain vendors to study and predict the impact of U.S. sanctions that have occurred and may have in the future.
- Select domestic independent controllable related systems and chip manufacturers to confirm the existing product status and market practical application experience, and establish cooperative relations.
- Set reasonable performance requirements and verification purposes for domestic systems and chips, and try to import some domestic IT systems starting from non-critical applications.
- Strengthen software adaptation development to ensure the compatibility, stability and operational performance of software for different systems.
- Establish or strengthen investment in domestic basic IT hardware and software manufacturers to ensure the influence of manufacturers' product development plans.
- When establishing a new product development plan, priority is given to domestic supply chains and mature platforms, and semiconductor innovative technologies are actively adopted.
When talking about whether the chip industry will recover in 2024, Sheng Linghai said, "Yes, but to what extent it can recover depends on many factors, such as the Russian-Ukrainian war, the degree of inventory digestion in the market, the US presidential election and so on." "As for whether the growth rate of China's chip industry can exceed that of the world, it depends on whether mobile phones, automobiles, and industrial chips can achieve higher growth rates."
He predicted that in the next five years, local network chips, consumer chips, MCUs, automotive chips, and analog chips using 28nm and 40nm processes will achieve rapid growth. The current hot "large computing power chip", although the long-term trend is good, but if the high technical threshold, tape-out supply chain and other problems are not completely solved, it will still be a long-term exploration process.