The World Integrated Circuit Association (WICA) recently released its 2023 ranking of the top 100 cities in the global semiconductor industry. According to the list, the U.S. and China each have 26 cities represented, leading the rankings. South Korea, Japan, and Taiwan have 9, 9, and 5 cities listed, respectively.

Notably, Shanghai and Beijing have secured spots in the top ten, ranked fifth and ninth globally, highlighting China’s growing potential and prominence in the semiconductor industry.

In the WICA’s recently released “2023 Global Semiconductor Industry Comprehensive Competitiveness Top 100 Cities White Paper” (referred to as the white paper), the top five cities are identified as Santa Clara, Hsinchu, Seoul, San Jose, and Shanghai.

The white paper highlights that China has the largest semiconductor application market in the world, with a complete industry chain. The design and manufacturing sectors are at a mid-level globally, with a significant number of design companies and substantial growth. Additionally, China’s packaging and testing technologies have reached the forefront globally.

Reportedly, China’s semiconductor industry is poised for continued robust growth, driven by expanding demands in automotive electronics, the Internet of Things (IoT), industrial control, and new energy, supported by favorable policies and financial resources.

As per the white paper, Shanghai is home to several semiconductor giants, such as SMIC, Hua Hong Semiconductor, Unisoc, and AMEC, serving as a major hub for China’s semiconductor industry. In recent years, Shanghai’s semiconductor sector has reportedly sustained its growth, developing a complete industry chain from design and manufacturing to packaging and testing.

The white paper further notes that Beijing also hosts numerous key semiconductor companies, including Tsinghua Unigroup, SMIC, Naura, and GigaDevice. The city has gradually become a core area in the global semiconductor industry, with a well-developed industry chain covering design, manufacturing, and packaging/testing, forming a relatively complete industrial ecosystem.

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(Photo credit: SMIC)

China’s two major semiconductor foundries, Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor, released their Q2 2024 financial results on August 8.

Both companies reported sharp declines in net profit. SMIC, the leading foundry, saw its Q2 revenue increase by 21.8% year-over-year to USD 1.901 billion, but its net profit fell by 59.1% to USD 165 million.

Moreover, SMIC’s financial report indicates that the company expects its revenue to increase by 13% to 15% quarter-over-quarter in the third quarter, with a gross margin between 18% and 20%.

SMIC stated that its second-quarter revenue and gross margin both exceeded expectations, driven by an increase in wafer sales. Its revenue grew by 9% quarter-over-quarter to USD 1.9 billion, and the gross margin rose by 0.2 percentage points to 13.9%.

The company shipped over 2.11 million 8-inch equivalent wafers, marking an 18% increase from the previous quarter. However, the average selling price per wafer declined by 8% due to changes in the product mix.

On the other hand, Hua Hong Semiconductor’s Q2 revenue decreased by 24.2% year-over-year to USD 478.524 million, primarily due to a decline in average selling prices, though this was in line with expectations. Net profit dropped by 91.5% to USD 6.673 million. The gross margin stood at 10.5%.

Hua Hong Semiconductor’s financial report projects that third-quarter revenue will be between USD 500 million and 520 million, with a gross margin of approximately 10% to 12%.

Hua Hong Semiconductor’s President, Junjun Tang, further noted that the global semiconductor market is experiencing a gradual recovery from its bottom. After several quarters of sustained weakness, there are signs of stabilization and recovery in certain areas, driven by sectors like consumer electronics. The company’s second-quarter capacity utilization improved further from the first quarter, nearing full production.

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(Photo credit: SMIC)

According to a report by China’s financial media outlet Yicai, in 2023, China’s import quantity and value of integrated circuits experienced a significant decline, influenced by factors such as the overall downturn in the global chip market and the U.S. ban on the sale of chips to China.

The latest data from the Chinese Customs Administration indicates that in 2023, China imported a total of 479.5 billion integrated circuits, a 10.8% decrease compared to 2022, with an import value of $349.4 billion, marking a 15.4% year-on-year decline.

Industry experts suggest that the soft importation of integrated circuits and semiconductor equipment in China reflects the global economic headwinds in 2023, especially the impact of sluggish sales of Chinese smartphones and laptops. Simultaneously, Chinese companies are striving to increase domestic chip production to reduce dependence on imported chips.

Despite the time required for China to achieve mass production in the field of artificial intelligence chips, the push by the Chinese government to establish a more resilient chip supply chain has motivated local manufacturers to actively increase production capacity in mature nodes. These chips are used in devices such as automobiles and home appliances, unaffected by the current U.S. restrictions.

Public information reveals that SMIC, Hua Hong Group, and Nexchip are among the most active in expanding production, focusing on specialty processes such as driver ICs, CIS/ISP, and power semiconductor ICs.

With China’s significant investment in mature nodes, it is positioned at a time when the global chip industry is poised for recovery. According to a recent TrendForce’s data, China currently has 44 operational semiconductor wafer fabs, with an additional 22 under construction. By the end of 2024, 32 Chinese wafer fabs will expand their capacity for 28-nanometer and older mature chips.

TrendForce predicts that by 2027, China’s share of mature process capacity in the global market will increase from 31% in 2023 to 39%, with further growth potential if equipment procurement progresses smoothly.

(Image: SMIC)