TrendForce Says China’s DRAM Industry Takes Its First Step with SummitView’s Acquisition of ISSI

A consortium of Chinese investors led by Summitview Capital announced on March 12 that they have acquired Integrated Silicon Solution (ISSI), a fabless semiconductor company listed on the NASDAQ, for 640 million USD. According to the findings of DRAMeXchange, a division of TrendForce, the consortium of investors include eTown MemTek, Hua Capital, Huaqing Jiye Investment Management, and Venture Capital Guiding Fund of Shanghai. The guiding fund was created with the support of the government, while Hua Capital manages Beijing IC Industry Development Fund. This deal, which reflects cooperation between major state-owned funds in Shanghai and Bejing, follows the Chinese government’s declaration to invest 120 billion RMB in the semiconductor industry last year. DRAMeXchange indicates that the Chinese government is acting on its words and putting together the necessary technological capacities to create a complete DRAM industry. 

On the whole, the Chinese government has altered their approaches to the advancement of the country’s electronics sector. Currently, China’s semiconductor imports (such as CPU, AP, DRAM, and Flash) actually exceed its petroleum imports, so substitution will take on greater significance in future policies. In cell phone chip manufacturing, Chinese semiconductor company Tsinghua Unigroup is able to marshal the resources of its acquisitions, like Spreadtrum and RDA, and partners like Intel to achieve effective results. With CPU, DRAM, and Flash accounting for a large portion of the import spending, the Chinese government is entering negotiations with DRAM makers and other semiconductor companies in Taiwan. The state aims to radically improve the DRAM trade balance by taking the following initiatives: the integration of technology, HR, and advantages of international standards; and the combination of China’s market scale and Taiwan’s production technologies. 

China consumed 10.2 billion US dollars of DRAM in 2014, representing 20% of the global DRAM turnover. The turnover for mobile DRAM in the same year reached 5.6 billion US dollars and took up 55% of DRAM turnover in China, whereas PC DRAM and server DRAM respectively accounted for 19% and 11%. Also in 2014, notebook shipments in China reached 25 million units and desktop shipments totaled 32 million units, respectively representing 14% and 25% of the global market shares. These figures show China’s DRAM consumer market has strong growth potential. The findings of DRAMeXchange also indicate that the scale of China’s DRAM market is now the equivalent of two fabs capable of 100K productions per month. The DRAM demands from consumer electronics will only grow bigger in the future with potential output value surpassing tens of billions of US dollars. 

Based in the United States, ISSI designs and markets DDR3, DDR2, and SDRAM. The manufacturing of its products are outsourced to foundries such as TSMC and UMC. Its revenue for 2014 was 320 million USD. This merger is just the first step for the Chinese DRAM industry. The next step for the central government will be choosing a province for setting up DRAM fabrication plants. Presently there are five provinces competing for these fabs. Then, the state will support consolidations in upstream supply chain in order for Chinese IC companies to develop their own technologies. Xi’an Sinochip Semiconductors, for example, is an IC design house that owns IP and has strong linkages with the downstream sector. Thus, it has a complete, vertically-integrated supply chain. In sum, creating a clustering effect in the ecosystem of the semiconductor industry will keep fabs in China and ensure sustainable growth.