The hottest Wall Street Journal how China will sub

2022-09-22
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Wall Street: how will China subvert the chip industry

most electronic products in the world are already produced by Chinese enterprises. Now China wants to assemble these products with its own chips. Although manufacturing semiconductor components is much more difficult than assembly, from the experience of many industries as a whole, it may be a mistake to think that China does not have the ability to subvert the industry

according to Bain company, China plans to invest up to US $108billion in the domestic chip industry in the next 10 years. According to Gartner, a consulting firm, China imports nearly half of the world's chips, mainly for the production and export of electronic products, but China's chip production is less than 10% of the global production

the Chinese government believes that this situation poses a threat to national security, and China has taken the construction of independent semiconductor supply chain as a national key project

the Chinese government has invested a huge amount of money in local chip manufacturers. Take the state-owned chip manufacturer Tsinghua Unigroup, which received $22billion from a state-owned bank and a government support fund in March. According to semi, there are at least 20 chip manufacturing enterprises under construction in China

despite the large investment, it will take at least a few years for Chinese chips to be put on the market. And even then, there will still be a technological gap between China and the top chip manufacturers that is difficult to catch up with. In the field of chip manufacturing and memory chips, which China focuses on investment, China is far behind the industry leaders such as Samsung and TSMC. Moreover, these two companies are also carrying out billions of dollars. Our machines are strictly selected to produce dollars in order to maintain a leading position. Moreover, these chip industry leaders can also take advantage of technological advantages to gain cost advantages. Therefore, even with the support of state-owned funds, it is difficult for Chinese companies to maintain the money burning mode

China initially planned to build the domestic chip industry by means of acquisition. According to Dealogic, in 2015, the total overseas acquisition transactions announced by Chinese companies in the semiconductor field reached a record $43billion, but only $5.2 billion of them were completed. The main reason for the failure of the transaction is that it is difficult for the relevant transaction to obtain the approval of the U.S. regulatory authorities

these unsuccessful transactions include the US $23billion acquisition of memory chip manufacturer Micron Technology Inc. (MI plastic auto parts have more cost advantages than traditional metal parts), and the US $2.5 billion acquisition of Fairchild Semiconductor International Inc. led by another state-owned enterprise, China Resources (Holdings) Ltd. In the first half of this year, the overseas mergers and acquisitions of China's semiconductor industry totaled US $1.6 billion, a year-on-year decrease of 81%

however, Chinese chip manufacturers still have great potential in some areas, such as those using chips that do not need the best, as long as enough equipment. Huawei, oppo, vivo and other domestic brands have created equipment popular in China and some developing markets. As the market share of Apple Inc. (AAPL) and Samsung continued to decline, these three brands accounted for nearly half of the shipments in China's smart market last year

if domestic chips can meet some minimum standards, these Chinese manufacturers may become big buyers of domestic chips. Small and medium-sized overseas chip manufacturers that do not have an efficient cost structure as market leaders may be hit by the flooding of low-cost chips in the market. Companies such as Taiwan United Microelectronics Corp., UMC, Nanya Technology Co., Ltd., whose experimental machines are best-selling overseas, our Jinan test fund is still a few manufacturers in Jinan, and even South Korea's SK Hynix Inc., may be affected

China's waves in the chip industry may not shake the industry leader, but it may eliminate the laggards

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