Major Foundries Ready to Battle for a Share of China’s Fast-Growing IC Market, TrendForce Reports

Taiwan-based chip maker and semiconductor foundry Powerchip broke ground for a 12-inch fab today (October 20) in Hefei, capital city of Anhui Province in China. This fab is a RMB 13.53 billion joint venture between Powerchip and Hefei City Government and will be initially producing large-size LCD driver ICs on the 0.15um process. The fab is expected to be in operation in 2017 with a capacity of 40,000 wafers per month. According to global market research firm TrendForce, Chinese IC design houses have benefitted from generous government subsidies in recent years. Moreover, Chinese OEM vendors are extending their overall share of the downstream system market worldwide. As their products become increasingly competitive, Chinese IC design houses such as HiSilicon and Spreadtrum are also developing into a growing challenge to the U.S. and European IC industries. At the same time, major foundries are scrambling to China in order to seize a strategic position in this vast market.

TrendForce’s latest data reveals that the strength of the Chinese fabless IC industry has built up significantly since 2009 due to strong domestic demand and rise of domestic IC design companies. China’s share of the global fabless IC sales therefore has expanded steadily, from 7.1% in 2009 to the estimated 18.5% in 2015. The total sales revenue of the Chinese fabless IC industry between 2009 and 2015 is also projected to grow at a high CAGR of 25%.

Based on TrendForce’s analysis, foundry demand growth will be highest in China in the next three years due to increasing orders from Chinese IC design houses. The 2015~2017 period will therefore be crucial for major international foundries in their competition to establish a secure foothold in China as to benefit from the anticipated demand surge. Process technologies, from the 28nm to the more advanced 14/16nm, will also be a key factor in gaining Chinese market shares. Other important factors to success will include developing strategic alliances with local technology enterprises and getting strong support from the Chinese government. To achieve these, international foundries would need to find ways to maximize mutual benefits with all local industry participants in China.

UMC is ahead of other foundries in setting up operations in China

Among the foundries that have set up operations in China, Taiwan-based United Microelectronics Corporation (UMC) has been the fastest in building fabs there. Presently, UMC has a fab in Suzhou with a capacity of 60,000~70,000 wafers per month. This fab, which is a joint venture with a local foundry service HeJian Technology, is not planned for further expansion in 2016. However, UMC has partnered up with Xiamen Municipal People’s Government, to build a 12-inch fab in Xiamen. The construction of the Xiamen fab began in March of this year, and UMC will be investing US$1.3~1.4 billion in the US$6.2 billion project within this five-year period. The fab is scheduled to be in operation sometimes during the fourth quarter of 2016 and the first quarter of 2017, with the initial capacity of 10,000~20,000 wafers per month on the 40/55nm processes. Depending on the market situation, UMC may expand Xiamen fab’s capacity and upgrade its manufacturing technology to the 28nm in the future.

China’s leading domestic foundry, Semiconductor Manufacturing International Corporation (SMIC), presently has three 8-inch fabs respectively situated in Shanghai, Tianjin and Shenzhen. The Shanghai and Tianjin fabs have a combined capacity of 130,000~140,000 wafers per month, whereas the Shenzhen fab is scheduled to start production in the fourth quarter of this year. SMIC’s 8-inch capacity in total is estimated to reach 150,000~160,000 wafers per month in 2016. SMIC also has two 12-inch fabs separately located in Shanghai and Beijing. Their combined capacity is about 50,000 wafers per month, and the foundry plans to expand the Beijing fab’s capacity by another 10,000 wafers per month. Whether SMIC can elevate to a new level of operation will depend on its ability to overcome the bottleneck in the 28nm manufacturing.

Foundry giant Taiwan Semiconductor Manufacturing Company (TSMC) currently has an 8-inch fab located in Songjiang Industrial Zone, southwest of Shanghai. This plant’s capacity is around 100,000~110,000 wafers per month. The company is also internally assessing the necessity of building a 12-inch fab in China. Once the plan is given the go ahead, TSMC will probably first introduce the 28nm or more advanced process to the new plant considering the construction schedule and market demand.