Strategy Note /
China

China's 2015-2020 Semiconductor Leap, in 2 Charts

  • The semiconductor industry is an epitome of a global supply chain

  • This article focuses on the Chinese semiconductor sector, from the market outlook to the government's policies

  • We analyze China's recent progress by comparing its presence in the global semiconductor ecosystem in 2015 and 2020

Alex Doonanco
Alex Doonanco

Marketing Manager

EqualOcean
24 November 2021
Published by

To read the full article for free, please click here.

Seeing a lot of progress, the country, however, is yet to avoid the guns-and-butter situation, serving the global industry primarily within the capital and labor-driven realms.

chip

A substantial share of industrial production today is taking place in developing countries. Goods are produced in genuinely global chains: they are often designed in one country and manufactured in another, with parts and components originating in third countries.

The semiconductor industry is an epitome of a global supply chain. It is known for its complexity with multiple tiers of suppliers located in different regions. Such a setup increases productivity and enhances specialization within the industry but makes the chain quite volatile, with key players depending on each other.

This article focuses on the Chinese semiconductor sector, from the market outlook to the government's policies. We analyze the country's recent progress by comparing its presence in the global semiconductor ecosystem in 2015 and 2020.

China's chips in 2015: insignificant across many links

On the R&D side, the US-based companies held up to 85% of the global electronic design automation (EDA) market and around 45% of the chip design segment, while accounting for less than 20% in the parts of the chain where R&D is secondary. On the other hand, even under the assembly, packaging & testing, the most labor-driven part of the supply chain, China could only take 12% of the global market.

2015.jpg.jpg

Being the world's largest consumer electronics market, China is incomparable in demand for such products. Yet, its ability to produce the essential inputs for its consumption has long remained constrained. With the increasing IC trade deficit, China released the 'Made in China 2025' strategy, which was played down in 2018 as many have accused the country of creating an unlevel playing field for foreign technology companies. Later on, however, China still proceeded with extensive tax reliefs and exemptions for local chipmakers. That all came along with the state's financial support (for one, through the 'Big Fund') aiming to change the 'world's factory' status to a 'technology-intensive powerhouse' with home-grown innovation. Since then, China has seen some positive results.

In just five years

In 2020, the US kept dominating the semiconductor supply chain's most innovation-heavy links, with a slightly lower share of the EDA market but became more prominent in the design segment. Furthermore, the country also increased its capabilities in wafer fabrication and assembly, packaging & testing to strengthen the local supply chain.

2020.jpg.jpg

China, in the meantime, has made impressive improvements across the whole supply chain...

To read the full article for free, please click here.