Ding Wenwu, the director-general of MIIT’s semiconductor sector division, has established a detailed plan on how to proceed with the development of the industry. Moreover, he has chosen top industry professionals to evaluate the fund’s performance. Thus, the investment criteria will be mainly based on technological, financial and human resources that local governments are able offer rather than political considerations.

Chinese semiconductor companies will likely to see changes at the management level and shifts in strategic alliances once a national R&D team for the DRAM industry has been formally established. The construction of fabrication plants will help create an industry cluster that will gradually draw semiconductor companies and high-level talents in IC design and manufacturing outside China into the country.

With the existing IC manufacturing bases and companies serving as the foundation for development, forthcoming investments projects will involve bringing the local leading talents together and forming alliances between semiconductor and IC design companies. Partnerships with the global top three DRAM manufacturers may also be in the works.

DRAMeXchange expects China, with its huge war chest and immense home market, will enter the global semiconductor industry via DRAM manufacturing. However, the established players – Samsung, SK Hynix and Micron – control much of the intellectual property (IP) assets, creating a high entry barrier for newcomers. For the Chinese competitors, mergers and acquisitions are now the fastest way for them to catch up to the big three DRAM suppliers in IP development. The partnership agreement between Intel and Spreadtrum is one such example. The deal brings many-fold benefits to both companies as the former has the technological know-how and the latter has a dominant position in the China market.

The Chinese government’s all-out efforts to bring IP assets to its fledgling DRAM industry is again seen in the acquisition of the U.S.-based Integrated Silicon Solutions Incorporated (ISSI) by SummitView Capital, a Chinese investment consortium. After a protracted negotiation, SummitView bought ISSI for 21 U.S. dollars per share on June 11, outbidding its rival Cypress Semiconductor’s 20.25 U.S. dollars per share.

China also eagerly seeks Taiwan’s semiconductor industry as a partner since the island’s IC manufacturers offers a wealth of technologies and experiences. Recently, senior officials from Chinese provinces and cities have made personal visits to Taiwanese companies related to DRAM design and production. Aside from exploring possibilities for collaboration, the Chinese representatives are also considering recruiting local talents as they are known for their strong R&D capabilities and top-tier global connections.

DRAMeXchange’s latest research finds that with China set on developing its DRAM industry, its next few steps will be crucial. Acquiring partners with the right technologies, experienced R&D teams, and IP assets will determine the schedule of mass production for DRAM products in China. And this in turn will determine the overall result of the state’s policy. Unlike NAND flash products, which can be used for lower-end products if the quality is subpar, DRAM products cannot be of poor quality regardless of their density.

When the manufacturing technology is in place, Chinese DRAM makers will first concentrate their production on PC and specialty DRAM products before advancing to mobile DRAM. Though mobile DRAM has seen rapid growth in recent years, PC and specialty DRAM are less difficult to mass produce. DRAMeXchange estimates it will take at least three to seven years for China’s IC industry to fully integrate hardware and software resources. While the country’s DRAM makers will initially focus on satisfying internal demands, they certainly have their sights set on the global market.