China invests billions to boost chip industry
In the wake of 2013 allegations, that the US was cyber-snooping on China, the country has decided the best way to reduce its cyber-security risk is to become self reliant and move away from US and Taiwan-based semiconductor producers such as Qualcom and MediaTek.
The move toward self-reliance has led China to invest billions of dollars in a group of chip designers that experts say could eventually rival current industry leaders. China’s now has nine companies that design and sell chips in the global top 50 up from just one in 2009, such as Hi Silicon, a subsidiary of Huawei Technologies. Spreadtrum Communications and RDA Microelectronics, which are controlled by state-backed Tsinghua Unigroup, All Winner Technology, Leadcore Technology, Galaxycore Microelectronics and Goodix Technology.
Data analyst TrendForce said the chip designers have seen market share grow because of clients such as Chinese smartphone manufacturers
“The Chinese fabless industry is expanding by leaps and bounds,” Bernstein analyst Mark Li told Reuters, referring to designers, which contract out fabrication to so-called foundries such as Taiwan Semiconductor Manufacturing.
Even though the technology of Chinese chip designers is four to five years behind top rivals, China is likely to seize second place in the $20 billion-plus chip design industry from Taiwan this year, Li said.
In order to increase domestic development, the government told chip firms they needed revenues to rise by more than 20% annually in order to build “a group of world-class companies” by 2030, said Reuters.
The government has created a $21.7 billion national fund, as well as at least five other government-led investment vehicles in cities such as Beijing, Shanghai and Nanjing, China, for a total of approximately $32 billion under management to build national champions in the chip ecosystem, according to consulting McKinsey & Co.