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TrendForce further forecasts that total revenue of China’s IC industry for 2018 will come to a new record high of around RMB 620 billion, with the annual growth again reaching around the 20% level. By contrast, the average revenue growth rate of the worldwide IC industry for 2018 is projected at 3.4%.
“Developments in China’s IC industry is driven by import substitution demand, government policies, major funding sources and innovative applications for semiconductor technologies,” noted Jeter Teo, research director of TrendForce. “Currently, key products in China’s IC market such as processors and memory components are still imported from overseas. China in fact has imported more than RMB 1.4 trillion worth of IC products annually for four consecutive years, from 2012 to 2016. Therefore, increasing domestic IC production has become a critical mission for the Chinese government.”
China’s recent policies show that the country is more determined than ever to develop its domestic IC industry. The establishment of the National IC Investment Fund in 2014 signaled that the Chinese government has changed its approach to supporting domestic IC companies. Rather than just providing subsidies to companies like before, the Chinese government is now actively reorganizing the industry by financially backing effective M&A deals.
According to data, the National IC Investment Fund already raised RMB 138.7 billion in its first round of fundraising. The total sum raised by other local funds in China for the building of the domestic IC industry has also exceeded RMB 500 billion. In the past, IC demand in China mainly came from smartphones, tablets and other consumer electronics products. Going forward, the Internet of Things (IoT), artificial intelligence (AI), 5G networking and connected smart vehicles will be the innovative applications generating growth opportunities for the domestic IC industry.
China’s IC industry has also undergone structural changes as seen in the revenue shares taken by different sectors within the industry over the recent years. “For the first time, IC design houses took more of the industry’s total revenue than testing and packaging provider in 2016,” Teo pointed out.
“Within the 2017 to 2018 period, the IC design section of the domestic supply chain is going to keep growing. This growth will be attributed to the IoT market, where AI and 5G solutions will be driving the expansionary momentum. Other revenue opportunities will come from emerging applications such as biometric sensor hardware for fingerprint and facial recognition, dual-lens camera and AMOLED. In 2018, the revenue share of IC design houses in the Chinese IC industry is forecast to reach 38.8%, the largest among all sections.”
As for developments in China’s IC manufacturing, the country currently has 22 fabs for 12-inch wafers and 18 fabs for 8-inch wafers. Out of the total number of 12-inch wafer fabs, eight are still under construction. Among the 8-inch wafer fabs, five are also being built. The revenue share of the manufacturing section in China’s IC supply chain is forecast to expand rapidly to 28.48% in 2018 as more fabs are expected to be in operation during the coming year.
The outlook for China’s IC testing and packaging sector is positive as well. Domestic testing and packaging providers have benefitted from the formation of industry clusters across the country. Furthermore, their capabilities to produce high-end solutions are expected to mature as they obtain or develop advanced technologies and build up their production capacities. Considering various factors including the gradual advances on the technology front and the steady increases in volume of product orders, TrendForce believes China’s IC testing and packaging industry as a whole will maintain double-digit revenue growth for 2017 and 2018.
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