It was reported on April 6 that in 2021, domestic semiconductors are hot, but five of the top ten chip manufacturers in mainland China are Intel, Samsung, SK Hynix, TSMC, UMC and other international chip manufacturing giants. Subsidiary established in mainland China. This makes the “domestic” chips produced by them slightly different from the “domestic” concept that is generally understood as “independently developed and manufactured by local Chinese companies.”
Recently, during a hearing in the U.S. Senate, U.S. Republican Senator Rick Scott accused Intel of having a factory in China and hoped that it would close the factory and withdraw from China. Intel CEO Pat Gelsinger (Pat Gelsinger) responded that if Intel wants to become the world’s largest semiconductor supplier, it must join China.
Building factories in China is not unique to Intel.International giants such as Samsung, SK Hynix, TSMC, and UMC have established subsidiaries and factories in mainland China for nearly 20 years..
In recent years, these international chip giants have continued to increase their presence in China, and their mainland subsidiaries have even developed faster and better than domestic semiconductor players.
According to a previous speech by Ye Tianchun, chairman of the Integrated Circuit Branch of the China Semiconductor Industry Association, among the top ten wafer manufacturing companies in mainland China from 2016 to 2020, the overall proportion of sales revenue of domestic companies decreased from 44% to 27.7%, while the remaining The share is contributed by foreign and Taiwanese companies.
This article will sort out the manufacturing, packaging and testing layout of these international chip giants in mainland China.
01. The proportion of domestic investment in wafer manufacturing dropped to 27%, and the domestic chip leader only ranked third
Under the trend of localization of chips, China’s semiconductor industry has made great achievements in both sales and fab construction.
Data from the China Semiconductor Industry Association shows that in 2020, the sales of my country’s integrated circuit industry will reach 884.8 billion yuan, of which the integrated circuit manufacturing industry has maintained a growth rate of 23% in recent years, and its revenue in 2020 will reach 256 billion yuan. According to data from the National Bureau of Statistics, my country’s integrated circuit production will increase by 33.3% in 2021.
In terms of fab construction, China’s growth is ahead of Europe, America, South Korea, Japan and other regions. According to the Semiconductor Industry Association International (SEMI) report, China is expected to build 16 new fabs in 2021 and 2022, of which 8 will be built in mainland China, higher than 6 in the Americas and 3 in Europe + Middle East , 2 in Japan and 2 in South Korea.
▲ The number of new fabs in each region in 2021 and 2022 (Source: SEMI)
Although sales and production capacity are growing rapidly, to a large extent, the drivers of domestic semiconductor production capacity and sales growth are not all domestic players as commonly known.
In November 2021, Ye Tianchun, Chairman of the Integrated Circuit Branch of the China Semiconductor Industry Association, Vice Chairman and Secretary General of the China Integrated Circuit Innovation Alliance, shared the development of the integrated circuit manufacturing industry in mainland China at the 2021 China Integrated Circuit Manufacturing Annual Conference.
The secrets behind domestic semiconductors are revealed in Ye Tianchun’s two PPTs. The first one is the ranking of the top ten companies in mainland China’s IC wafer manufacturing industry during the “Thirteenth Five-Year Plan” period.
▲ The top ten companies in China’s IC wafer manufacturing industry during the “Thirteenth Five-Year Plan” period (Photo source: Ye Tianchun’s 2021 IC Manufacturing Annual Conference PPT)
In this table,Industry leader SMIC can actually only rank third in the mainland wafer manufacturing industry. For the remaining top ten companies, the foreign-owned Chinese companies of the three international giants Samsung, Intel, and SK Hynix ranked first, second and fourth; Taiwan-owned TSMC (China), Leadcore/Hejian Chip (holding The shareholder is UMC) ranked sixth and eighth respectively.
For purely domestic companies, only SMIC ranked third, Shanghai Huahong ranked fifth, China Resources Microelectronics ranked seventh, Xi’an Microelectronics Institute and Wuhan Xinxin ranked ninth and tenth respectively.
The second table shows the proportion of sales revenue of the top ten companies in the IC wafer manufacturing industry in mainland China. During the period from 2016 to 2020, the sales revenue of domestic-funded wafer manufacturing enterprises in the top ten companies increased from 36.44 billion yuan to 56.74 billion yuan, but the overall proportion decreased from 44% to 27.7%.
▲ The top ten companies and their distribution of China’s IC wafer manufacturing industry during the “Thirteenth Five-Year Plan” period (Photo source: Ye Tianchun’s 2021 IC Manufacturing Annual Conference PPT)
In contrast, the share of sales revenue contributed by foreign wafer manufacturing companies has increased from 49.1% in 2016 to 61.3%; the share of revenue contributed by Taiwan-funded companies has also increased from 6.9% to 11%.
Ye Tianchun pointed out that this means that the industry is growing,Although the manufacturing of domestic enterprises is also growing, the growth rate of manufacturing is much lower than that of foreign and Taiwan-funded enterpriseswhich is a phenomenon worthy of attention.
This phenomenon not only exists in the wafer manufacturing industry, but also occurs in the IC packaging and testing industry. According to the research report of the Packaging Branch of the China Semiconductor Industry Association in 2020, in terms of sales, only 13 of the top 30 packaging and testing manufacturers in mainland China are domestic or joint venture packaging and testing manufacturers, and the rest are foreign or Taiwan-funded.
However, unlike the wafer manufacturing industry, the top three IC packaging and testing sales in mainland China in 2019 are Changdian Technology, Huada Microelectronics (the controlling shareholder of Tongfu Microelectronics) and Huatian Electronics, all of which are domestic enterprises.
▲ Top 30 mainland packaging and testing manufacturers in 2019 (Note: The 30th issuer is Yong Si Electronics, picture source: Yong Si Electronics prospectus)
02. Samsung set up a joint venture Intel 50% microprocessor in Chengdu as early as 1993.
Samsung, Intel, SK Hynix, TSMC, UMC, these international chip giants occupying a place among the top ten companies in China’s integrated circuit wafer manufacturing industry, have already laid out their manufacturing, packaging and testing businesses in China.
Among them, Samsung was the first to enter China and established a joint venture as early as 1993; SK Hynix, which entered China at the latest, set up a memory chip factory in Wuxi as early as 2004, 18 years ago. To an important extent, Intel’s packaging and testing base in Chengdu conducts packaging and testing for half of its microprocessors in the world; SK Hynix has gotten rid of high debts with the help of its Wuxi chip factory, and has come back to life.
1. Samsung: Entered China in 1993, with an investment of 10 billion US dollars in the first phase
Samsung established a joint venture in Tianjin as early as April 1993, and its semiconductor business started its layout in Suzhou in 1994. In 1994, Samsung Electronics (Suzhou) Semiconductor Co., Ltd. was established. Its main products are DRAM and flash memory, with a total investment of more than 300 million US dollars.
In 2012, Samsung established its wholly-owned subsidiary Samsung (China) Semiconductor Co., Ltd. in Xi’an to produce memory chips. The total investment of the first phase of the project reached 10 billion US dollars, which was the largest foreign investment project in China’s electronic information industry since the reform and opening up.
In August 2017, Samsung decided to invest an additional US$7 billion in Xi’an to build the second phase of Samsung (China) Semiconductor Co., Ltd.’s memory chip project in Xi’an High-tech Comprehensive Bonded Zone.
2. Intel: Intel China was established in 1994, and the largest packaging and testing base was built in Chengdu
In January 1994, Intel (China) Co., Ltd. was established in Shanghai. Today, Intel has a presence in China in the fields of manufacturing and packaging and testing.
In terms of chip manufacturing, Intel announced in 2007 that it would invest US$2.5 billion to build a 12-inch wafer fabrication plant in Dalian, which is Intel’s first wafer plant in Asia. The Dalian fab was put into operation in 2010. Before 2015, it mainly produced 65nm process products, and after that, it mainly produced 3D NAND storage products, which is the main production line of Intel’s flash memory business.
In October 2020, Intel agreed to sell its flash memory business to South Korean storage manufacturer SK Hynix for $9 billion. The deal has been approved by all regulatory authorities, including the State Administration for Market Regulation. In January this year, SK Hynix announced the completion of the first phase of its acquisition process.
In addition, Intel’s largest packaging and testing base in the world is located in Chengdu, China. Intel’s Chengdu factory has become one of Intel’s three global wafer preprocessing factories, and half of the world’s mobile device microprocessors come from Intel Chengdu.
▲ Intel Chengdu Plant
3. SK Hynix: Building a factory in Wuxi in 2004 is the key to getting rid of debt
In addition to Samsung, another South Korean semiconductor giant, SK Hynix, also attaches great importance to China’s layout, and even regards it as the secret to saving the company.
In August 2004, Hynix (the company was not acquired by SK Group at the time) and STMicroelectronics planned to build a memory chip factory in Nanjing, China.
At that time, Hynix was levied by the United States and the European Union with import tariffs as high as 34% and 45% respectively. By investing in the construction of factories in China, it used $250 million in cash and $250 million worth of equipment to obtain a $2 billion factory 2/ 3 capacity.
Former Hynix CEO Eui-Jei Woo cited building a factory in China as one of six factors in Hynix’s recovery from high debt.
▲ Eui-Jei Woo summed up the reasons for the successful reorganization of Hynix
4. TSMC: Entered in 2002 and invested $3 billion to build a 12-inch wafer fab
TSMC established TSMC (Shanghai) in 2002 and began to build a factory. In the fourth quarter of 2004, TSMC’s first 8-inch wafer fab in mainland China was put into production. The chips produced are mainly used in communications, computers and other consumer electronics products.
In March 2016, TSMC announced that it had signed an investment agreement with the Nanjing Municipal Government to invest US$3 billion to establish a 100% holding TSMC (Nanjing) Co., Ltd. in Nanjing. The company has a 12-inch wafer fab to produce 16nm chips and a Design Service Center.
TSMC founder Zhang Zhongmou said that TSMC set up a 12-inch fab and design service center in Nanjing to assist customers nearby and further increase business opportunities when the mainland semiconductor market is growing rapidly.
▲ TSMC Nanjing 12-inch fab
5. Hejian: Founded in 2001, it was planned to be listed on the Science and Technology Innovation Board
UMC established Hejian Technology (Suzhou) Co., Ltd. in 2001. The process includes 0.5μm to 110nm, and its products include logic chips, mixed-signal chips, embedded non-volatile storage, high voltage and image sensors.
In 2014, UMC and Fujian Electronics Group jointly funded the establishment of Xiamen Lianxin. Its 12-inch fab has entered mass production in the fourth quarter of 2016, and can already provide 40nm and 28nm foundry services. The planned monthly production capacity is 50,000 12-inch wafers, and the total investment is expected to reach 6.2 billion US dollars.
In June 2018, with Hejian as the main body, Hejian and Xiamen Lianxin planned to be listed on the Science and Technology Innovation Board, and their IPO was accepted on March 22, 2019, almost becoming the first Taiwan-funded enterprise on the Science and Technology Innovation Board. It is reported that due to problems such as parent-subsidiary competition, Hejian withdrew its listing application on the Science and Technology Innovation Board in July 2019.
▲ 2019 Hejian shareholding structure
03. Samsung, the top 500 foreign trade company, occupies 12 seats, TSMC, SK Hynix also increase
So how big are foreign chip giants such as Intel, Samsung, and SK Hynix in China?
According to Intel’s latest 2021 annual report, its full-year revenue was $79.024 billion, of which mainland China provided $21.141 billion in revenue, Intel’s largest source of revenue.
According to customs data, the import and export volume of Intel Products (Chengdu) Co., Ltd. in 2019 was 29.799 billion US dollars, ranking fourth among China’s top 500 foreign trade companies, second only to PetroChina, Sinopec and Hongfujin Precision Electronics (Zhengzhou) Co., Ltd.; The import and export volume of Intel Trading (Shanghai) Co., Ltd. was 12.083 billion US dollars, ranking 17th; the import and export volume of Intel Semiconductor (Dalian) Co., Ltd. was 5.669 billion US dollars, ranking 48th.
▲ The top 21 of the top 500 national import and export list (Photo source: China International Economic and Trade Statistics Association)
In addition to Intel, many companies from international chip giants such as Samsung, Micron, SK Hynix, Freescale (now NXP), and Amkor are also among the top 500 import and export companies in China.
Among them, Samsung occupies 12 places on the list, including Samsung Electronics (Suzhou) Semiconductor Co., Ltd. with an import and export volume of 17.553 billion US dollars and Samsung (China) Semiconductor Co., Ltd. with an import and export volume of 9.726 billion US dollars. The company ranked 14th and 21st, respectively.
In the past two years, with the intensification of the core shortage problem and the tension of geopolitical relations, the semiconductor industry is becoming the focus of governments in developed countries and regions such as the United States, Europe, South Korea, and Japan. When the chip bills in various countries were passed and landed, international chip giants such as Samsung, SK Hynix, and TSMC still increased their manufacturing layout in China.
In April 2021, TSMC announced that it plans to invest US$2.887 billion to expand its 28nm production capacity in Nanjing. After the expansion is completed, its monthly production capacity will add 40,000 12-inch wafers.
In December 2021, at the Wuxi Integrated Circuit Industry Innovation and Development Summit Forum, Luo Zhenqiu, general manager of TSMC Nanjing, said that the expansion of TSMC’s Nanjing plant is on schedule, and equipment will be installed after the second year. It will enter mass production in the quarter and will be fully produced in 2023.
Today, SK Hynix has also increased its investment and layout in China, not only acquiring Intel’s flash memory plant in Dalian, but also relocating its M8 fab originally located in South Korea to Wuxi. The capacity transfer is expected to be completed in the first half of this year.
On March 28 this year, according to Taiwan media reports, Samsung’s NAND flash memory plant in Xi’an has completed the second-phase expansion, and its NAND flash memory output may increase significantly.
For these international chip giants, mainland China has long become an important node and market for their chip manufacturing, packaging and testing, and sales. TSMC, Samsung, and SK Hynix are still increasing their manufacturing footprint in China.
04. Conclusion: International giants may increase their layout in China
As the global core shortage problem ferments, the EU, the United States, Japan, South Korea and other regions and countries have begun to pay more attention to protecting the local chip industry, and their regulatory authorities have become more cautious about the mergers and acquisitions of large chip companies, and more hope to build local chip manufacturing capabilities.
At the same time, chip semiconductors are the industry with the highest technical requirements. For chip manufacturing companies, product yield is the life and death line of the company. Backed by international chip giants, foreign capital and joint ventures have natural advantages in talent and technology. Moreover, the factories of international giants in the mainland are often not the most advanced production lines, and they have more experience in improving product yield.
China is now the world’s largest and fastest-growing semiconductor market, and international chip giants may continue to increase their presence in China in the future. The competition between domestic semiconductor companies and international giants in the local market will also affect and determine the future direction of the domestic semiconductor industry.
Reference sources: “Layout of Foreign IC Companies in China” SIMIT Strategic Research Office, “US chipmakers push for CHIPS Act funding to close gap with Asia” Nikkei Asia
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