semiconductor companies chinese design equipment china sales

techsuch May 9, 2021 0 Comments

China’s position in the global semiconductor value chainIn this third article about China’s role in the global semiconductor industryI analyse the current state of affairs of the Chinese semiconductor industryin different segments. In the previous articles, I looked at the possibleeffects of a US-China decoupling in the semiconductor industry and the impactof the Big Fund and Chinese investments in semiconductor R&D. Both articlesare available in Chinese as well: decoupling, Big Fund (文章翻译成中文: 脱钩, 大基金). Inmy next article that will be published soon, I will give an updated analysisof the impact of the US-China tech war on the semiconductor industry.China aims to accelerate the development of the domestic semiconductorindustry and reduce the reliance on imports of chips. But the semiconductorindustry’s global value chain spans a wide variety of segments such asequipment, materials, software, design, manufacturing, assembly and testing.One of the conclusions of my previous article was that Chinese (government)investments are often focused on increasing manufacturing capacity andacquiring existing technology instead of real new technology development.Besides having fabs to actually make chips, the tools and equipment needed forchip manufacturing and testing, the software needed to design chips, and thedesign capabilities themselves are all important in the semiconductor valuechain.In this article I look at the position of (mainland) China, the United States(US), and the rest of the world (ROW) in five different segments of thesemiconductor value chain: equipment (EQP), Electronic Design Automationsoftware & Intellectual Property core (EDA & IP), design/fabless & IntegratedDevice Manufacturer (DES & IDM), foundry (FOU), and Outsourced SemiconductorAssembly & Test (OSAT).Table 1 shows the combined revenues of the major companies in these fivesegments for each of the three regions. I included the sales data of 136companies: 27 equipment (6 from China, 13 from the rest of the world, and 8from the United States), 9 EDA and IP (1 CN, 4 ROW, 4 US), 76 design and IDM(30 CN, 23 ROW, 23 US), 12 foundry (4 CN, 7 ROW, 1 US), and 12 OSAT (5 CN, 6ROW, 1 US). Sales data is available from the annual report for listedcompanies, but unfortunately there are quite some relevant semiconductorcompanies that are not listed (e.g., Arm, GlobalFoundries, HiSilicon, Kioxia,Mentor Graphics, UNISOC). For 15 of those I based the sales data on publiclyavailable information. For another 65 companies no sales information wasavailable so they are not included in the analysis, which means theconsolidated numbers in this article are a lower limit of the actual numbers.I would like to emphasise that the list of companies mentioned in this articleis by no means exhaustive, but I believe it provides a representative overviewof the global semiconductor value chain (with the materials segment excluded).As the objective of this article is to provide an overview of the Chinesesemiconductor industry, I included more (and smaller) companies from China.For the rest of the world and the United States I included only the largestand most important companies. (i)Table 1: Semiconductor sales by segment and region.If we look at all sales data across five segments the whole semiconductorindustry combined sales is US$ 571.8 billion. US headquartered companiesaccount for 47%, companies from the rest of the world for 45%, and China basedcompanies for 7%. For all three regions, design & IDM is the segment withhighest sales. Globally, design & IDM accounts for 71% of all sales, followedby equipment (13%) and foundry (10%). OSAT (5%) and EDA and IP (2%) generateconsiderably less revenue.China is relatively strong in OSAT, mainly because of JCET which accounts for57% of China’s revenue in this segment. For EDA & IP and especially equipment,China is far behind the United States and rest of the world. The rest of theworld region’s strongest segment is foundry, because of TSMC (78% of theregion’s foundry revenue) and UMC (11%) from Taiwan. In addition, the rest ofthe world region is leading in OSAT, again because of Taiwanese companies suchas ASE (73% of the region’s OSAT revenue) and PowerTech (12%). The US’ mainstrengths are in design & IDM and EDA & IP. Intel is the world’s largestsemiconductor company based on revenue (US$ 72 billion) and Micron, Qualcommand Broadcom all have more than US$ 20 billion sales. For EDA software allthree global leaders are US headquartered: Synopsys, Cadence Design Systems,and Mentor Graphics (owned by German Siemens). Equipment is a narrow victoryby the rest of the world region, led by Dutch ASML (#2 equipment companyglobally) and Japanese Tokyo Electron (#3), over the US, with AppliedMaterials (#1), Lam Research (#4), and KLA (#5).Figure 1 also represents the sales data and includes all companies thataccount for at least 10% of sales of their segment in their own region.Figure 1: Semiconductor sales by segment and region.Further breaking down the revenues for rest of the world gives the followingranking: 1. United States, US$ 270.9 billion 2. Korea, US$ 80.9 billion 3. Taiwan, US$ 75.9 billion 4. Japan, US$ 50.0 billion 5. China, US$ 41.3 billion 6. The Netherlands, US$ 25.4 billionKorea is home to two of the largest IDMs, Samsung (#2, US$ 56 billion sales)and SK Hynix (#3, US$ 23 billion). In addition to the foundry and OSATcompanies mentioned above, Taiwan is also home to design companies such asMediaTek, Novatek and Realtek. Japan’s strength is in equipment with TokyoElectron, Dainippon Screen and Advantest, and IDM with Kioxia, SonySemiconductors Solutions, and Renesas, amongst others. China’s largestsemiconductor companies are design companies Unis and HiSilicon, foundry SMICand packaging and test provider JCET. More than half of the Netherlands’semiconductor revenue is generated by lithography equipment supplier ASML butASM International (equipment, US$ 1.4 billion), NXP (IDM, US$ 8.9 billion) andNexperia (IDM, US$ 1.4 billion) also contribute generously.In the remainder of this article I will look at the five segments separately,with special attention for the performance of Chinese companies compared tothe global leaders.EquipmentMany different types of tools and equipment are needed to make chips.Important steps in the IC manufacturing process include lithography, ionimplantation, deposition (e.g., CVD, PVD), etching, cleaning, and testing. Themajor equipment suppliers are from the US, Japan and the Netherlands, butChina is also trying to develop its domestic semiconductor equipment industry.The lithography equipment segment is dominated by Dutch ASML with a marketshare of 85% and the only relevant competitors are Canon and Nikon from Japan.China’s sole lithography equipment maker is Shanghai Micro ElectronicsEquipment (SMEE) and its most advanced tool at present enables 90nm chipproduction. ASML sold their first lithography systems that could producecomplex 90nm chips in 2004 already (16 years ago!).For the deposition equipment segment there are more competitors. Some of thebig players are active in PVD and CVD such as Applied Materials (US), TokyoElectron (JP) and Lam Research (US), but also smaller companies such asAixtron (DE), ASM International (NL), Evatec (CH) and Ulvac (JP). NAURA,resulting from the 2017 merger between Sevenstar Electronics (established in2001) and Beijing North Microelectronics (NMC, also 2001), is the largestsemiconductor equipment company in China and active in this field.Another more established Chinese equipment company is Advanced Micro-fabrication Equipment (AMEC). The Shanghai-based company that produces etchequipment and MOCVD tools was founded in 2004 and was in the first batch ofcompanies to get listed on the new Shanghai Stock Exchange Science &Technology Innovation Board (or STAR Market) in 2019. Qualcomm participated inAMEC’s B round in 2007 and is still one of its shareholders. AMEC’s etchequipment is verified by TSMC for its 7nm process.Other companies active in cleaning, packaging and testing equipment includeAdvantest (JP), ASM Pacific Technology (SG), Dainippon Screen (JP), andTeradyne (US). More Chinese semiconductor equipment companies worth mentioningare Hangzhou Changchuan Technology, Kingsemi, and PNC Process Systems buttheir revenues are well below US$ 150 million.Table 2: Semiconductor equipment companies’ sales and R&D spending per region.EDA & IPElectronic Design Automation software and IP core is another area where Chinastill lags far behind. The vast majority of the Chinese EDA market is taken bythe three global leaders Synopsys, Cadence, and Mentor. There are some Chinesecompanies active in the EDA segment though, such as Cellix, Empyrean, ProPlus,Semitronix, and Xpeedic. Empyrean seems to lead the Chinese domestic field,but I could not find financial information for any of these companies. Cellixis reported to be preparing for a listing on the STAR market and ProPlusclosed an investment round in April 2020 in which Intel reported itparticipated.Table 3: EDA software & IP core companies’ sales and R&D spending per region.An IP core is intellectual property of a licensing party that can be used as abuilding block for chip design. IC design companies use third party IP andtheir own IP to design their chips. The leading company in this field is UK-based but Japanese (Softbank) owned Arm Holdings. Basically, all smartphonesand most IoT devices use Arm’s processor architecture. Softbank closed the Armacquisition in September 2016, and just 1.5 years later, in April 2018, ArmChina (also known as Arm mini China) was created. Arm China is 51% controlledby a consortium of Chinese investors and Arm owns 49%. Arm China sells andlicenses Arm (UK) technology in China but has also gradually moved todeveloping its own (Chinese) IP. For example, Arm China has developed a designthat allows Chinese-made chips to run a cryptographic algorithm built byChina’s State Cryptography Administration.Imagination Technologies is also UK-headquartered but was acquired by Cayman-based and Chinese funded private equity fund Canyon Bridge in November 2017.In April 2020 Imagination announced plans to appoint new board directors fromChina Reform Holdings, the major investor in Canyon Bridge. After the UKgovernment expressed concerns this proposal was withdrawn. Imagination mainlydevelops IP for Graphic Processor Units (GPUs). Apple used to be Imagination’sbiggest customer until 2016 and earlier this year they signed a new multi-yearlicense agreement under which Apple will have access to a wider range ofImagination’s IP.Previously mentioned Synopsys and Cadence are also active in the IP corelicensing field, and so is US-based Rambus, mainly licensing memorytechnology. In China, VeriSilicon is the leading (but loss making) company inthis field. Established in 2001, it’s investors include Intel, Samsung,Xiaomi, the Big Fund, and Walden International. VeriSilicon has announced theintention to list on Shanghai’s STAR market.Besides the Arm architecture, there are only a few other processorarchitectures. Like Arm, MIPS and RISC-V are so called RISC (ReducedInstruction-Set Computer) architectures and x86 is a CISC (ComplexInstruction-Set Computer) architecture. In general, CISC is more suitable forhigh performance processors (complexity and speed; e.g., servers) and RISC forpower efficiency (e.g., smartphones).MIPS Technologies developed the MIPS architecture in the 1980s and licensed itto chip designers. Imagination Technologies bought MIPS Technologies in 2013and sold it to US based Wave Computing prior to the Canyon Bridge acquisitionof Imagination in 2017. Wave Computing filed for bankruptcy in April 2020 butthere are reports that MIPS will continue its business independently. MIPS isnot nearly as successful as Arm but in China it is used by Loongson (formerlyknown as Godson and creator of China’s first domestic CPU) and Ingenic(designing CPUs and IoT and wearables chips).RISC-V is an open source project that started at UC Berkeley in the US in 2010and aims to provide royalty free instruction set architectures. RISC-V startedin academia but in 2015 the RISC-V Foundation was established to create acommunity for standardisation and improvement through open collaboration. InMarch 2020 the RISC-V International Association (RVI) was incorporated inSwitzerland after reflecting on the geo-political landscape and to calm“concerns of political disruption to the open collaboration model”. RVImentions explicitly on its website that “there have not been any exportrestrictions on RISC-V in the US and we have complied with all US laws. Themove does not circumvent any existing restrictions, but rather alleviatesuncertainty going forward.” RVI has never received or pursued funding from anygovernment and currently has more than 500 members, including Alibaba, Huawei,the Institute of Computing Technology of the Chinese Academy of Sciences, andVeriSilicon from China. US members include Western Digital, Nvidia, andRambus. RISC-V is relatively new so no major competition for Arm yet, but thecommunity is moving fast and in the current geopolitical climate open source,which is not export-controlled by definition, may be the way forward forChinese chip design companies.Design & IDMFor this article I combined the fabless design companies and Integrated DeviceManufacturers in one segment as they all have the capabilities to designchips. The fabless design companies rely on foundries to manufacture the chipsthey designed, while IDMs make their chips in-house. Design & IDM is thelargest segment of the semiconductor value chain across regions (72% of totalsemiconductor sales for China, 61% for rest of the world, and 81% for US); italso has the most companies included in this analysis for each region. Theworld’s biggest semiconductor companies are all active in this segment: IDMsIntel, Samsung, SK Hynix, and Micron, and fabless design companies Qualcommand Broadcom. They all have more than US$ 20 billion sales; only foundry TSMCbelongs to the same category with US$ 34.6 billion sales. Within the Design &IDM segment, the US is the clear leader with 54% of its sales, followed by therest of the world with 39% and China’s 7%.Table 4: IC design companies’ and IDMs’ sales and R&D spending per region.The biggest Chinese chip design companies are Unis (also known asUnisplendour) an HiSilicon (fully owned by Huawei). HiSilicon develops SoCs(System on a Chip; multiple components such as CPU, GPU, and memory on onechip) based on Arm architecture. HiSilicon designs smartphone chips (Kirin),server chips (Kunpeng), and smartphone modems (Balong). The newest Kirin 810outperformed competitor Qualcomm’s Snapdragon 855 SoC in the AI Benchmarktest. Qualcomm is the global market leader in smartphone SoCs and has held thesame position for the China market for a long time. Until Q1 2020 whenHiSilicon led the China smartphone SoC shipments ranking for the first time.COVID-19 has a big impact though, as smartphone SoC shipments decreased morethan 44% compared to Q1 2019.Unis is part of the Tsinghua Unigroup ecosystem. Unigroup’s subsidiariesinclude fabless companies Pango Microsystems, Tongxin Microelectronics, UnicMemory, Unigroup Guoxin, UNISOC (formerly known as Spreadtrum), and Unis;foundries UniIC Semiconductors, XMC and YMTC; and OSAT company Unimos. Unisand Guoxin are listed companies. UNISOC primarily designs entry-levelsmartphone and feature phone chips, which are very popular in India andAfrica.Another Chinese State-Owned Enterprise (SOE) that is very active in thesemiconductor industry is China Electronics Corporation (CEC). CEC’s companiesinclude fabless Anlogic, CE Huada Tech, Huada Semiconductor, Microne, PhytiumTechnology, Shanghai Belling, Solantro (a Canadian company acquired in 2018and now known as Huada Semiconductor North American R&D Centre), and SolomonSystech; foundry GTA Semiconductor; and OSAT company Chipadavanced. CE HuadaTech, Shanghai Belling, and Solomon Systech are listed companies.Chinese consumer electronics company (and smartphone vendor) Xiaomi has beenactive in chip design with its subsidiary Pinecone established in 2014. Early2017 Pinecone revealed the Surge S1 chipset, but Xiaomi’s 5C smartphone whichused the S1 failed because of high power consumption and heat output. In April2019 Xiaomi announced it would spin off and take a 25% stake in a new companyBig Fish Semiconductors to focus on the development of AI and IoT chips.Pinecone (51% owned by Xiaomi and 49% by China’s Datang Telecom) will keepdeveloping smartphone chips. Xiaomi also invested in IP provider VeriSiliconand is its second biggest shareholder behind the Big Fund.The Chinese design companies mentioned above mainly use Arm architecture butsome Chinese companies work with x86 architecture. Because x86 is a CISCarchitecture, it is the dominant architecture in the server market. Recentlythough, Arm and RISC-V based processors seem to get some more traction. Intelis market leader in the x86 processor market but AMD (also from the US) hasbeen gaining market share over the last years thanks to its Ryzen chiparchitecture. Besides them, only VIA Technologies from Taiwan has a x86 CPUlicense but VIA has not been successful at making the products to get closerto Intel and AMD’s market share.Interestingly though, on May 8 the first Chinese PCs with domesticallydeveloped x86 CPUs were released. They use the KX6000 processor series made byZhaoxin, a joint venture between VIA Technologies and the Shanghai localgovernment established in 2013. The performance of these KX6000 processors,which are based on architecture developed by VIA’s US subsidiary CentaurTechnology, is still far behind Intel and AMD’s current offerings, but it’sdefinitely suitable for its intended government use. This is an important stepin China’s plans to reduce dependence on foreign technology and Zhaoxin hasambitious plans to bridge the gap with Intel and AMD.AMD also set up a joint venture in China, with partners including highperformance computing maker Sugon and the Chinese Academy of Sciences. TianjinHaiguang Advanced Technology Investment Co (THATIC or Higon), set up in 2016,actually comprises two JVs with AMD holding 51% shares of Chengdu HaiguangMicroelectronics Technology (also known as HMC) and 30% of Chengdu Haiguang IC(also known as Hygon). AMD exported IP to subsidiary HMC and Hygon wouldcustomise the designs before they were sent to GlobalFoundries in the US formanufacturing. This allowed the Chinese side to call the processors ‘Chinese’and AMD to comply with all relevant export control legislation. Until June2019 that is, because then the US government added AMD’s JVs to the EntityList because Sugon had acknowledged military end uses and end users of itshigh-performance computers. The consequence is that US companies need to applyfor a license before exporting products and technology to these entities andthe US government follows a ‘presumption of denial’ policy.Intel set up a collaboration with Tsinghua University and Montage Technologyin 2016. Based on Intel’s x86 Xeon architecture and Tsinghua developedtechnology, Montage designed the Jintide CPU. Montage Technologies is listedon Shanghai’s STAR market since July 2019 and Intel owns 9% of its shares.One Sino-American collaboration in the semiconductor industry that did notlast long is the joint venture Qualcomm set up in 2016 with the Guizhouprovincial government. The JV, Huaxintong Semiconductor Technologies (HXT),55% owned by Guizhou province and 45% owned by Qualcomm, focused on designingserver chips based on Arm architecture. In November 2018 HXT announced thatthe StarDragon 4800 had started mass production. This processor is similar toQualcomm’s Centriq 2400 series with a modified crypto module to meet China’scommercial cryptographic algorithms standards. In April 2019 it was reportedthat the joint venture would shut down.RISC-V architecture is another area where Chinese companies have becomeincreasingly active. Alibaba Group acquired Hangzhou C-Sky Microsystems in2018 and reorganised its chip R&D activities into Pingtouge Semiconductor(also known as T-Head). In July 2019 Pingtouge announced it developed a16-core Xuan Tie 910 RISC-V CPU (XT910) and claimed it was the most powerfuldesign based on RISC-V IP yet. Two months later Alibaba also announced theHanguang 800 AI inference chip made with TSMC’s 12nm process. The NeuralProcessing Unit (NPU) is capable of handling complex tasks such as productsearch, image analysis, and personalised recommendations on Alibaba’se-commerce platforms.FoundryThe semiconductor pure play foundry segment is dominated by the rest of theworld region, mainly because of Taiwan’s TSMC, the world leader in this fieldby far. The number two (UMC) and three (Vanguard) foundries from the rest ofthe world region are also based in Taiwan. The only US-based foundry is Abu-Dhabi owned GlobalFoundries and in China the largest foundries are SMIC andHuahong Grace. For some other Chinese foundries such as Huali (also fromHuahong Group), YMTC and XMC (both part of Tsinghua Unigroup), and CXMT, Ihave not found financial data.Table 5: Foundry sales and R&D spending per region.SMIC has made quite some progress over the years and is now capable of 14nmmass production, although the defect rates are still very high according tosome sources. Industry leader TSMC and IDM Samsung are already mass producing7nm (and TSMC starting 5nm), while GlobalFoundries announced it stopped 7nmdevelopment because of the high costs involved. On May 11 it was announcedthat SMIC had started mass production of Huawei/HiSilicon’s Kirin 710A on itsFinFET 14nm process. Although these chips are not current state-of-the-art(Kirin 710 was launched in July 2018), this is a significant development forChina’s semiconductor industry as it is the first time that Huawei uses afoundry other than TSMC to make its smartphone chips.Other Chinese foundries, focused on developing memory chips, are YMTC andCXMT. The memory market is dominated by Samsung and SK Hynix from Korea andUS-based Micron. On April 13, YMTC announced it has developed 128-layer 3DNAND flash memory chip X2-6070, based on its own Xtacking architecture.Whether X2-6070 will indeed be a success depends on multiple factors,including the timing of mass production (probably H1 2021) and yield (theproportion of chips on a wafer that work properly). So after designing thememory chip, getting the production process right will be the next bigchallenge for YMTC.CXMT, China’s new DRAM memory maker (established in 2016, then known asInnotron), announced at the end of April that they signed a long-term patentlicense agreement with US-based Rambus to get access to a wide variety of DRAMpatents. This deal will strengthen and diversify CXMT’s IP portfolio. Throughpreviously signed licensing agreements, CXMT already has access to Qimonda’sIP (Qimonda spun off from Infineon in 2006 and was the world’s second largestDRAM company at the time but ceased operations in 2011).OSATHalf of the top 10 global Outsourced Semiconductor Assembly and Test (OSAT)companies are from Taiwan. Market leader ASE Group’s market share is 47%,followed by Amkor from the US and JCET from China. With the other 4 Taiwanesecompanies, two Chinese companies (TFME and Tianshui Huatian) and oneSingaporean company complete the top 10.Table 6: OSAT companies’ sales and R&D spending per region.This analysis shows that China is still a relatively small player in theglobal semiconductor value chain, except for the OSAT segment where Chinaholds more than 20% of the global market. There are 3 Chinese companies in theglobal top 6 OSAT companies, while 6 years ago only JCET made the top 10. Thisalso shows that the developments in the Chinese semiconductor industry can gofast.However, in other segments, particularly semiconductor equipment and EDA & IP,China is still far behind. Although AMEC has developed tools which are used inmany foundries, AMEC is still a small player (around #20) among all thesemiconductor equipment makers ranked by revenue. And size matters. To staycompetitive in the semiconductor industry, companies need to invest in R&D andwith higher sales companies can invest more in new technological developmentsand innovation.Table 7: Average R&D investment as percentage of sales across segments andregions.There are no huge differences between the three regions when it comes tocompanies’ average R&D spending as percentage of sales. American design & IDMcompanies spend more on R&D than their competitors from China and the rest ofthe world, and Chinese foundry and OSAT companies on average spend a largerpart of their revenue on R&D than others. For the foundry segment, this ismostly attributable to SMIC’s R&D spending (22.1%) which is much higher thanany other foundry in the world (Chinese Silan ranks second with 10.7% and TSMCis third with 8.5%). Looking at the actual R&D expenditures (in dollars),China’s share of global R&D expenditures is indeed higher than its share ofglobal sales for the foundry (18% vs 8%) and OSAT (23% vs 21%) segments.However, for both these segments the rest of the world’s R&D expenditures aremuch higher than those of China; for foundry the rest of the world regionspends 4.6 times as much on R&D as China, and for OSAT they spend 2.9 times asmuch.For the equipment and EDA & IP segments there are no apparent differencesbetween regions (and like for foundry and OSAT, the sample sizes on whichthese averages are based are small) but for design & IDM, US companies onaverage spend a higher percentage of their revenue on R&D than others. Becausethese are also the biggest companies in the whole industry, measured by sales,this is a major competitive advantage of the American semiconductor industry.Although US design & IDM companies account for 54% of global design & IDMsales, they are responsible for 72% (or a combined US$ 38.9 billion for the 22companies included in this analysis) of global R&D expenditures in thissegment. The amount of money Intel spends on R&D, US$ 13.4 billion, is higherthan the annual revenue of all semiconductor companies in the world except 8(Samsung, TSMC, Qualcomm, Micron, SK Hynix, Broadcom, Applied Materials, andTexas Instruments).The absence of major differences in R&D spending as percentage of salesbetween regions for the equipment and EDA & IP segments does not mean that itwill be easier for China to catch up in these areas. For example, ASML spendsaround US$ 2.2 billion on R&D, which is twice the annual revenue of all sixChinese semiconductor equipment companies included in this analysis combined.For EDA the whole industry basically depends on the three major vendorsSynopsys, Cadence, and Mentor. Although quite a few Chinese companies aredeveloping EDA tools, none of them are competitive as they are notcomprehensive enough (no complete design flow) and because the most advancedfabs and foundries will not use them, it is extremely difficult for them toget a better understanding of the processes and improve their software.Fortunately for China, some developments provide a more positive outlook forgrowing the domestic semiconductor industry. The establishment of Arm China,the acquisition of Imagination Technologies, Intel investing in MontageTechnology and ProPlus, the IP licensing deal between Rambus and CXMT, and thewhole development of the RISC-V movement, could bring opportunities tostrengthen China’s semiconductor industry. In the chip design field, HiSiliconis already world class and entered the top 10 of semiconductor sales leadersfor the first time in Q1 2020 according to IC Insights. Recent achievementsincluding Zhaoxin’s first domestically developed x86 CPU, Pingtouge’s RISC-Vbased CPU and AI inference chip, and YMTC’s 3D NAND flash memory chip,indicate progress is certainly being made in Chinese chip design. The recentannouncement that SMIC is mass producing HiSilicon’s Kirin 710A on 14nm FinFETis a significant development for China’s chip manufacturing.But… the challenges for particularly the equipment and EDA segments remain,and it is extremely difficult to catch up with industry leaders (also indesign and manufacturing) when they spend much more on R&D and thus maintaintheir technology leadership. The establishment of the Big Fund is one (small)step to help Chinese semiconductor companies to overcome this gap, andrecently there seems to be a trend for more Chinese semiconductor companies togo public, for example on Shanghai’s STAR market. AMEC and Montage Technologyare already listed there, SMIC, VeriSilicon and Cellix announced plans to doso, and Imagination Technologies, UNISOC, and Horizon Robotics are alsorumoured to file for an IPO. Although companies understandably look for morefunding and resources, they should also keep in mind that the interests ofinvestors (quick returns) do not always align with those of the companiesthemselves (long term commitment to R&D). There are no quick wins forcompanies that still need to establish their position in the globalsemiconductor value chain.And then of course the biggest stumbling block for the development of China’sdomestic semiconductor industry is the current geopolitical climate and recentactions taken by the US government that restrict American, and since May 15,2020 also non-American, companies from doing business with some Chinesesemiconductor companies. I will write more about the impact of the US-Chinatech war on the semiconductor industry in my next article. So stay tuned!I would like to end this article with a suggestion for further reading thatreally gave me a better understanding of the history and development of theChinese semiconductor industry. It is very informative and I really enjoyedreading the article originally written by Boss Dai (戴老板), published on hisWeChat account on May 15, 2018: 中国芯酸往事. The article is translated into Englishby Jeffrey Ding and Lorand Laskai and published in the July 8, 2019 ChinaAInewsletter: The Sour Past of “China Chips”.Bart van HezewijkOfficer for Innovation, Technology & ScienceNetherlands Innovation NetworkConsulate-General of the Kingdom of the Netherlands in Shanghai@bartvanhezewijk(i) Note on data collectionFor this analysis of the global semiconductor value chain I identified 201companies: 100 from China, 59 from rest of the world, and 42 from the US. 121of these companies are listed so I could get their sales and R&D spending datafrom their annual reports. The annual report used is the report for the fiscalyear ending 31 December 2019 or earlier that year, except for Aixtron, Goodix,JCET, PowerChip, Tower Semiconductor (31 Dec ‘18), Ambarella (31 Jan ‘20), andMarvell (1 Feb ‘20).For another 15 companies I used other publicly available data: * Arm (Softbank Group Annual Report 2019), Cambricon, GlobalFoundries, Imagination Technologies, Kioxia, Nexperia, Vanguard International Semiconductor (VIS Consolidated Financial Statements), and VeriSilicon. * For GalaxyCore, HiSilicon, Huada Semiconductor, Integrated Silicon Solutions Inc, Sanechips Technology, and UNISOC: Trendforce (2018 revenue). * For Mentor Graphics I calculated the 2019 revenue relative to Synopsys’ and Cadence’ 2019 revenue, based on their share of their combined revenues (Synopsys 46%, Cadence 33% and Mentor 21%) in 2016 and 2017 (latest available annual reports of Mentor).For some companies their semiconductor business is a part of their totalbusiness. For these companies I only included the semiconductor revenue: * Fujitsu Semiconductor: LSI Devices within Device Solutions, 5.3% of Fujitsu Group total revenue. * Hitachi Hitech: Electronic Device Systems, 20.1% of total revenue. * IBM: Systems (includes Servers & Storage Systems), 9.9% of total revenue. * Jusun Engineering: Semiconductor (Display and Solar Cell not included), 52% of total revenue. * Mitsubishi Electric: Electronic Devices, 4.4% of total revenue. * Samsung: Semiconductor within Device Solutions (inter-company revenue not included), 28% of Samsung Electronics total revenue. * Tianjin Zhonguan: Semiconductor Device (Semiconductor Materials and New Energy not included), 0.83% of total revenue. * Wonik IPS: Semiconductor (Display and Solar not included), 55% of total revenue.Some large companies that are active in the global semiconductor value chainare left out from the data analysis because they do not report financial datafor their semiconductor related business or their data was not specific enoughto be included in this analysis, e.g., Apple (US, DES), Baidu (CN, DES), Bosch(DE, DES), Canon (JP, EQP), and Nikon (JP, EQP).For all companies that reported their sales data in another currency than US$,I converted the data to US$ based on the yearly average exchange rate for therelevant year as calculated by OFX.

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