‘Made in China 2025’: How Beijing is boosting its semiconductor industry

September 25, 2018


Marcelo
Duhalde


Yujing
Liu

As part of the ambitious “Made in China 2025” blueprint, Chinese officials have set the semiconductor industry a goal of reaching US$305 billion in output by 2030, and meeting 80 per cent of domestic demand. In 2016, China produced US$65 billion of semiconductors and supplied 33 per cent of the domestic market. This is how Beijing hopes to make this happen.

Semiconductors are the cornerstone technology of the information age. These tiny electronic devices, usually smaller than a postage stamp, power the modern economy by acting as data-processing brains for products, from smartphones to cars and spacecraft.

Uses of semiconductors
Semiconductors are essential to all electronic equipment, and they have also transformed traditional products such as cars.

A global industry
The making of a semiconductor usually involves several countries, tens of thousands of miles travelled and almost two weeks’ transit.

Stages of specialisation
As the industry requires highly specialised skills and heavy investments, two production models have emerged.

The Integrated Device Manufacturer (IDM) model
An IDM firm carries out all of the four major production stages: design, manufacturing, assembly, testing and packaging.

The Fabless-Foundry model
The production process is split among companies. Design companies focus on design and contract out the manufacturing, or fabrication, and are thus “fabless.” Foundries concentrate on contract manufacturing, while the firms that perform assembly, testing and packaging are known as Outsourced Semiconductor Assembly and Test (OSAT) companies.

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Evolution of the semiconductor ecosystem
The semiconductor industry has grown into a global ecosystem, with different players since the 1950s.

While IDMs still account for over half of the industry’s revenue, fabless manufacturers, foundries and OSAT firms have reported higher compound annual growth rates because of economies of scale.

The value chain has become increasingly dispersed across the world, with most IDMs and design firms based in the US and South Korea, while foundries and OSAT firms are concentrated in Taiwan and China.

This map shows the locations of different types of factories by six leading IDM fims - Intel, Micron, Toshiba, Samsung Electronics, Infineon, and NXP.

Click on a factory type

Research and Design    
Manufacturing    
Assembly    
Testing    

The world’s biggest semiconductor consumers
China’s surging demand for chips in the past two decades has fuelled the growth of the global semiconductor market. The country now consumes more than half of the world’s chips.

China semiconductor industry by segment
While Chinese firms have traditionally focused on packaging and testing, design work has been growing at 30 per cent annually from 2005 to 2015, making it the fastest-growing segment.

Share of the semiconductor production market
By country (%)

China's semiconductor annual trade (US$ billions)

China’s semiconductor manufacturing capacity by province and region (2016)
There are around 300 production plants spread across 20 provinces in China. The majority are in the economically more advanced eastern region.

What is a semiconductor?
Semiconductors control the flow of current in electronic devices. The unique properties of the materials that they are made up of, silicon being the most common one, make them both a conductor and an insulator of electricity.

This quality lead to the creation of the transistor in 1947, a history-changing achievement that saw its inventors awarded the Nobel Prize in Physics. Made of semiconducting material, transistors can switch between “off” and “on” states – these are expressed as zero and one, the binary numbers that are the basis for all computer programming.

Integrated circuits, commonly referred to as “chips”, comprise billions of these transistors on a tiny piece of semiconductor material. Such circuits make up the majority of sales of semiconductors. The most powerful type of chip is the microprocessor, or “core”, which contains the central processing unit (CPU). It controls electronic devices such as computers by processing critical data and executing the most important instructions.

Miniaturisation is the motto
Today we take it for granted that we can carry computers around in our pockets and on our wrists. This is because, while transistors have always been too small to see with the human eye, they are constantly being made smaller. To give an idea of just how small they have become, take a look at the below infographic in which we compare a 1971 transistor to China and show how the scale of transistors has changed past few decades.

Next generation of semiconductors…
Are the ones that will power:

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