The Rise of China IC Industry - As A Global Ecosystem Partner

Lung Chu 居龙President,SEMI ChinaJuly 13，2017

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Outline

• China’s IC Development – Why?• Government Initiatives vs Market Forces• Investments• Opportunities and Challenges

– IC Design– Manufacturing– Assembly & Test– Equipment & Material

• Summary– Global Ecosystem Partner

CHINA330

Companies

EUROPE255

Companies

INDIA25 Companies

JAPAN414

CompaniesKOREA203

CompaniesAMERICAS

476 Companies

SINGAPORE

33 Companies

TAIWAN215

Companies

Global Semiconductor Market Growth Rate Has Slowed Down…until 2017

PC

Mobile Computing,Internet of Things

Mobile Phone

4

China Consumption/Demand Has Driven Recent Global Semiconductor Growth

Source:McKinsey & Company

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China: Largest and Growing Share of WW IC Market

6

China Continues to Outpace the Rest of World in IC Industry Growth

Sales (0.1B of CNY) YoY Growth Rate

7

Growth in all Segments

IC Design:Package/TestIC Mfg”

8

But Dominated by Imports –Semiconductor: #1 Import and Huge Trade Deficit

9

Big Gap Between Local IC Supply and DemandChina IC Market: Heavy Dependency on Imports

数据来源: SEMI 2016年8月

10

Electronics Mfg: US/EU/JP→SE Asia→TW, ChinaSemiconductor Mfg：US/EU→JP→KR, TW, → China(?)

2000年全球半导体产能按地区分布

2015年全球半导体产能按地区分布

The Shift of Global Electronics Industry to Asia Pac

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Key Words Development Strategy

Design 1.Supply Chain Collaboration

2.M&A

Near Term: Mobile Smart Terminal and Network Communication: Mobile terminal, Digital TV, Network Communication, Smart Wearable and OSMid Term Term：Cloud Computing, IOT, Big DataBreak Through：Smart Card/Electricity/Transportation、SatelliteNavigation、Industrial Control、Financial Electronics, Automotive, Medical and Embedded software

Mfg 1.Capex

2.Advanced Node

Speed up the 45/40nm foundry capacity ramp up and 32/28nm line set up, 3D process R&D, capability set up of 22/20nm and 16/14nm foundry production capability.Excel the specialized production line such as Analog and mix circuit, MEMS, high voltage and RF

Pkg/test 1. M&A2. Evolution

CSP, WLP, TSV and 3D Stack

EquipmentMaterial

1. Key Equipment and Material Break-through2.Manufacturing Synergy

R&D in key equipment such as Lithography, Etching, and ImplantR&D of key material such as Photoresist and large wafer

High Lights of 2014 China Government National IC Development Guidelines

Source: SEMI 2016.8

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China National IC Industry Development Guideline- Highlights of Key Goals in 2020

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纲要的两个重点

Sino IC (Big) Fund集成电路产业基金

兼并重组M&A

Estimated Initial Phase amount: RMB300Billion (including local government)

Type: Equity Fund

Majorly for Fab capacity and M&A

IC Design: M&A under market mechanism

Packaging & Test: M&A and consolidation

数据来源: SEMI 2016年8月

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China IC Funds – Central & Local

About

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IC Investment Funds Enabled by China Government

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All Over the Map. National Fever in Pursuing IC Industry

4 Major Regions• Yangzi Delta: Design, Manufacturing, OSAT, Equipment• Beijing/Tianjing/Bohai Area: M&A• Pan Zhujiang Delta: Design, System and Applications• Center-West China: Memory and Special Processes

Yangzi River Delta: Design, Manufacturing, OSAT, Equipment

Beijing/Tianjing/Bohai Area: Manufacturing, Equipment, M&A

Center-West China: Memory and Special Processes

Pan Pearl River Delta: Design, System and Applications

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全球并购意向金额创纪录

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成长壮大

减少运营成本

传统行业逻辑

协同供应链、协同生产制造、消灭竞争对手

战略扩张

新市场、产品需求增长

投资组合互补

填补技术、产品空缺

中国政策

提高自给能力

2016年至今：并购M&A~1000亿美元 US$98.5B

China related is less than 5%

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1.0 1.5 2.3 3.0 3.4 4.0 5.4 7.3 9.8 13.117.0

21.2

0.3 0.6 0.8 2.2 2.8 3.9 5.2 5.7 5.06.6

7.57.9

9.7

11.5

14.3

2.0 2.4 3.03.4 4.2

6.48.3 8.9 7.3

9.39.5

16.4

17.7

20.4

22.5

2 3 47

913

16 18 16

2124

34

40

49

58

0

10

20

30

40

50

60

70

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

China Semiconductor Industry Revenue(B$)

IC Packaging&Test

IC Manufacture

IC Design

Source: CSIA, SEMI China, April 2016

China Semiconductor Industry – Significant growth Since 2000

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Revenue Target of 2014 Guideline纲要2014年目标

Source: CSIA, SEMI

中国集成电路产业营收和目标China IC Industry Revenue and Projection

40.5

57.5

143

$ Billion标注：1.营收值为中国所有集成电路企业销售所得，包含IC Fabless、代工厂、IDM和委外封装等企业。2.2015年营运目标是超过3500亿人民币；2015-2020年均增速超过20%。

2.4

数据来源: SEMI 2016年8月

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Growth in Supply Chain Segments

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China Fabless

China Top 10 Fabless（Unit：RMB 100M） Global Top 10 Fabless（Unit： US$M）Rank Company 2016 Rank Company 20161 海思 HiSilicon 30.3 1 Qualcomm 15,4362 清华紫光展瑞 Ziguang 12.5 2 Broadcom 13,8483 中兴微电子 ZTE IC 5.6 3 MediaTek 8,8004 华大半导体 HDSC* 4.76 4 Apple 6,4935 智芯微电子 Nari 3.56 5 Nvdia 6,3406 汇顶科技 Goodix 3.0 6 AMD 4,2387 士兰微电子 Silan 2.76 7 Hisilicon 3,7628 大唐半导体 Datang 2.43 8 Marvell 2,4039 敦泰科技 FocalTech 2.35 9 Xilinx 2,30510 中星微电子 Vimicro 2.05 10 Spreadtrum 1,510Total 69.31 总计 65,135

*HDSC Revenue includes Montage, Centec、Phytium、CSMT、EmpyreanData Source：CSIA 2017

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China Fabless: Increasing market share

China wafer demand at TSMC, SMIC, UMC, and Hua Hong has increased at 28% CAGR in 2011-2016.

Increasing share at TSMC including at advanced nodes

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China Fabless Design-Still Lacking in Key Technologies

% by local fablessSystem Device IC Made in China

Processor/MCUServer MPU 0%PC MPU 0%Industrial MCU 2%

FPGA/DSP Programable Logical FPGA/EPLD 0%Digital Process DSP 0%

Communication SystemMobile Communication

Application Processor 18%Communication Processor 22%Embeded MPU 0%Embeded DSP 0%

Core Network NPU 15%

Storage Devices Semicon StorageDRAM 0%NAND Flash 0%Nor Flash 5%

Display and Video HD TV/Smart TV Image Processor 5%Display Driver 0%

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Global IC Mfg Capacity Distribution

Source: SEMI World Fab Forecast, November 2015

WPM

China IC Mfg Capacity: -relatively low among global regions -and mostly at mature nodes

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Distribution of China 's Semiconductor Fabs

Major New Fabs：

- SMIC Beijing B2 in operation, B3 under construction, Shanghai: two 12-inch lines; Shenzhen: a 12-inch line; Ningbo one 8-inch line

- Wuhan Changjiang Memory(YMTC) initiated in March 2016, 3 NAND & NOR production lines;

- Hua Li new 12-inch line in Zhoupu; - Intel Dalian fab converted into NAND

production- UMC Xiamen 12-inch fab,production in

2017 - Jinghe Hefei 12 inch fab under

construction, production in 2017; - TSMC Nanjing 12-inch fab foundation,

production in 2018; - Jinhua new 12-inch memory fab

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The Race: Foundry Technology Nodes

Courtesy, Prof Wei Tsinghua U

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Global Top 10 Pkg/Test Companies 全球前10大封测厂

数据来源: IC Insight, 2017年4月

Amount in $US M

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2016 公司名称 总部 2016年销售额 2015年销售额 2016/2015增长率

1 江苏新潮集团 JCET 中国 193* 92.2 109.3

2 南通华达微电子NFME 中国 135.7** 56.4 140.6

3 威讯联合半导体（北京）有限公司

美国 83 62 33.9

4 华天科技 HuaTian 中国 66.6 47.8 39.3

5 恩智浦半导体公司 美国 58.9 54.2 8.7

6 英特尔 Intel 美国 39.7 40.5 -1.9

7 海太半导体 HiTech 中国 32.4 37.2 -12.9

8 上海凯虹 中国 30.4 30.1 1.0

9 安靠 Amkor 美国 30.1 29.5 2.0

10 盛碟半导体 Sandisk 中国 27.6 26.8 3.3

China Top 10 Pkg/Test Companies 中国十大封测厂2016

数据来源: CIA, SEMi整理 2016年8月

Amount in RMB 亿

*包括星科金朋销售数据**包括AMD苏州，马来西亚工厂销售数据

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Equipment and Material 半导体设备材料产业

Material 原材料及配套

设备 Equipment 367亿美元 US$36.7B

434亿美元, US$43.4B

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2015年全球十大半导体设备厂商

数据来源: Gartner, 2016

公司 公司 2015 营收(英文名) (中文名) (单位：亿美元)

1 Applied Materials 应用材料沉积、刻蚀、离子注入

、化学机械研磨等64.2 19.1

2 Lam Research 泛林 刻蚀、沉积、清洗等 48.1 14.3

3 ASML 阿斯麦 光刻设备 47.3 14.1

4 Tokyo Electron 东电电子沉积、刻蚀、匀胶显影

设备等43.3 12.9

5 KLA-Tencor 科天 硅片检测、测量设备 20.4 6.1

6Screen Semiconductor

Solutions迪恩士 刻蚀、清洗设备 9.7 2.9

7Hitachi High-Technologies

日立高新沉积、刻蚀、检测设备

、封装贴片设备等7.9 2.3

8 Nikon 尼康 光刻设备 7.2 2.2

9 Hitachi Kokusai日立国际

电气热处理设备 6.3 1.9

10 ASM International 先域 沉积、封装键合设备等 5.8 1.7

其它 75.8 22.5

2015 排名

主要产品领域2015 市场份额

(%)

China Local Supplier: <1-2% Market Share

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Wafer

5%

Shin-Etsu（JPN）

Sumco（JPN）

Siltronic（GER）

Sunedison（US）SAS（TW）

GRINMJRH

Wafer WorksSimgui

GuoShengZingSemi

Photoresist

8%

TOK（JPN）

Shipley（US）JSR（JPN）

DOW（US）Shin-Etsu（JPN）

KempurRuiHong

Gas

10%

Air Liquid（FRA）Praxair（US）Linde（GER）

Air Product（US）Matheson（GER）

718th research institute of CSIC

Huate GasNata Opto-

electronic Material

SputterMaterials

6%

JME（US）LMC（GER）

Tosoh SMD（JPN）

Japan Energy（JPN）

KFMIGRIKIN

CMP Slurries

9%

DOW（US）3M（US）

Cabot（US）Toray(JPN）

AnjiXinanna

Overview of Global IC Materials Suppliers

Global

ChinaMainland

ChinaMarketShare

China Local Supplier: <1% Market Share

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With Limited Competitiveness, China IC Industry Faces Challenges and Opportunities

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What’s Ahead? China Semiconductor Industry

• Fast Growing Application Market Opportunities– Mobile computing + 5G (Huawei)– AI, AR/VR, IoT, Cloud Computing, Big Data

(BAT)(WeChat)– Industrial 4.0、Smart Mfg 2025、IIot– New Energy, Smart (electic)Automotive– Smart Medical, Smart City, Smart Grid

• China’s Transition from Low-cost manufacturing to solution provider, then to innovation.

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China HSR –High Speed Rail

Japan

Europe

Europe: 6100KMJapan: 2800KmChina: 19000Km 30000KM

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CompletedConstructionPlanned, 2020

±500kV transimission line: 16，±800kV and higherUltra High-V transimission line:7，Total Capacity: 100GW，Distance: 300,000KM。

China Smart Grid

39

Smart (Electric) Vehicles

40

Summary

• Why? – Concerns of National Security and Trade Deficit– Market Driven

• China National IC Development Guideline and Big Fund– Necessary, Just Timely, or Maybe too late?

• Opportunities and Challenges– Design/Fabless: Mostly Low-Margin Consumer Segments– Mfg: 2-3 Generations Behind. Over capacity? Sustainability? – Assembly/Test: Improving competitiveness thru R&D and M&A– Equipment/Material: Dominated by US/JP/EU.

• 13-5 Plan and Beyond, Not a “Threat” yet. – China as a Global Ecosystem Partner– Opportunities for US and global players.– Low-Cost Mfg -> Solution -> Innovation

SEMICON China 2018 March 14-16, 2018