According to the ICinsights report, the United States is far ahead in terms of the IC market share of IDM and Fabless.
As shown in Figure 1, by 2020, US companies will account for 55% of the total global IC market, followed by South Korean companies with a 21% share. Leveraging its dominance in IC sales by fabless companies, Taiwanese companies accounted for 7% of total IC sales, 1 percentage point higher than European and Japanese companies.
As the chart shows, Chinese companies will only account for 5% of the global IC market in 2020.
The report further pointed out that Korean and Japanese companies are extremely weak in the fabless IC field, while Taiwanese and mainland Chinese companies have a very low share of the IDM IC market. And U.S.-based companies show the greatest balance in terms of IDM, fabless, and overall IC industry market share.
As can be seen from the report, in 2020, the market share of Japanese companies in the IC industry continues to be in good shape that dates back to the 1990s. As shown in Figure 2, in 1990, Japanese companies accounted for almost half of the global IC market share, and this share has declined sharply over the past 30 years, but only by 6% in 2020. Japanese companies, European companies also accounted for only 6% of the global IC market last year, compared to 9% in 1990.
Compared with the decline in IC market share of Japanese and European companies over the past three decades, the share of US and Asian IC suppliers has been rising since 1990. As the chart above shows, Asian companies’ share of the surge in the global IC market has grown from a paltry 4% in 1990 to 33% in 2020. If the increase in the share of Asian IC suppliers is counted, it is equivalent to a 30-year compound annual growth rate of IC sales of 15.5%, which is about twice the total compound annual growth rate of the entire IC market during the same period.
IC Insights: Chinese companies make only 5.9% of their chips
IC Insights released the 2021 edition of the McLean Report in February this year. New analysis and forecasts for the integrated circuit industry include an analysis of regional market shares, including China’s integrated circuit market by product type.
ICinsights said that China has been the world’s largest IC market since 2005 and has grown in size since then.
In 2020, China’s IC market increased to US$143.4 billion, up 9% from US$131.3 billion in 2019, according to the report. ICInsights estimates that 60 percent ($86 billion) of China’s $143.4 billion IC market is integrated into Electronic system equipment for export, while 40 percent of the IC market ($57.4 billion) is used in domestic consumer electronics systems in the device.
Figure 1 shows the Chinese IC market by product type. Leading the way are sales of logic devices, which accounted for 26 percent ($37.5 billion) of China’s IC market last year. ICInsights predicts that the logic market will remain the largest IC product segment in China through 2025, maintaining a strong CAGR of 10.5% over the forecast period.
In a year plagued by the virus, strong smartphone sales in China and globally, as well as sales of various computing systems, have led to microprocessors becoming China’s second-largest IC product segment last year. MPU sales in China, including revenue from specialized processors, rose 12% in 2020 to $32.7 billion.
Last year, DRAM became China’s third-largest IC market with a 19 percent share. In 2020, the DRAM and NAND flash memory markets together account for 30% of the total IC market in China. China’s high level of memory consumption is fueling the country’s strong desire to create more and more locally produced DRAM and NAND flash devices.
There is no denying that the long-term trend of increasing IC market share in China and the rest of the Asia-Pacific region is unchangeable. The combined share of China and Asia Pacific in the global IC market is expected to increase from 63.8% in 2020 to 68.1% in 2025, at a CAGR of 9.4% during this period.
China has been the largest consumer of ICs since 2005, but China is not necessarily a major producer of ICs now, nor will it be in the future. Of the $143.4 billion in ICs sold in China in 2020, ICs produced in China accounted for only 15.9%, or about $22.7 billion. Among them, the total output value of China-based companies is only 8.3 billion US dollars, accounting for only 5.9% of the country’s total IC market last year. Foreign companies with fab operations in China (eg, TSMC, SK Hynix, Samsung, UMC, etc.) still account for the majority of China’s IC production.
ICinsights: Mainland China will account for 22% of foundry business in 2020
According to a previous report by ICinsights, mainland China in 2018 contributed almost all the growth of the pure-play foundry market in that year. In 2019, the U.S.-China trade war slowed China’s economic growth, but its foundry market share still rose by two percentage points to 21%. In addition, despite Covid-19 shutting down the Chinese economy earlier in 2020, China’s share of the pure-play foundry market is forecast to be 22% in 2020, up 17 percentage points from 2010 levels ( figure 1).
Japan is expected to remain the smallest market for pure-play foundry sales, with a market share of just 5% in 2020 (up just 2 percentage points from 2010’s share). Japan’s foundry market is expected to be worth approximately $3.6 billion in 2020, and Japan’s pure-play foundry sales share is expected to be approximately 10% of the 2020 pure-play foundry market in the Americas ($35.1 billion).
IC Insights believes that the Japanese market for pure-play foundry services will only grow slightly in the future. The infrastructure of fabless IC companies in Japan is small and is not expected to grow much in the next five years. As such, almost all of the growth in Japanese fab demand is expected to come from a large number of Japanese IDMs (such as Renesas, Toshiba, Sony, etc.) utilizing IC foundry services.
The rise of HiSilicon and other fabless IC companies in mainland China has increased the demand for foundry services in the country. Figure 2 shows the 2018-2020 sales of China’s top pure-play foundries by IC Insights.
Overall, pure-play foundry sales in China rose 10% in 2019 to $11.8 billion, much better than the 1% decline in the total pure-play foundry market last year. Additionally, pure-play foundry sales to China are expected to grow 26% in 2020
As the chart shows, UMC had the fastest growth in sales in China, jumping 19%. Growth was driven by the continued addition of its Fab 12X in Xiamen, China, which opened in late 2016. The fab currently has a monthly capacity of 1.87K 300mm wafers. The expansion of 25,000 wafers per month is expected to be completed by mid-2021.
After jumping 59% in 2018, TSMC’s sales in China rose another 17% in 2019 to $6.9 billion. As a result, almost all of TSMC’s sales growth last year came from the Chinese market, where China’s share of the company’s sales more than doubled from 9% in 2016 to 20% in 2019. In 2020, China-based SMIC and Taiwan-based TSMC are expected to grow their sales in mainland China by 32% and 30%, respectively. For SMIC, the company’s sales in mainland China will grow 32% in 2020, a big turnaround from the 7% drop in China sales the company recorded in 2019.
TSMC’s sales in China were strong in the second half of 2019, aided by its sales of 7nm applications processors to fabless IC supplier HiSilicon. In the first half of 2020, TSMC’s mainland sales in China were flat at $220 million to $2.3 billion per quarter. Given that TSMC’s equipment shipments to HiSilicon ended in mid-September 2020, it remains to be seen whether this revenue can be replaced by sales from other Chinese companies in 4Q20.
ICinsights: Chinese chips are difficult to achieve the established 2025 goals
A well-known analyst firm ICinsights reported that there should be a very clear distinction between China’s IC market and China’s local IC production. As IC Insights has often pointed out, although China has been the largest IC consumer since 2005, this does not necessarily mean that China’s internal IC production will increase substantially.
As shown in Figure 1, China’s IC production accounted for 15.9% of its $143.4 billion IC market in 2020, up from 10.2% in 2010 10 years ago. Furthermore, IC Insights predicts that by 2025, this share will increase by 3.5 percentage points from 2020 to 19.4%. (an average annual increase of 0.7 percentage points).
ICinsights further noted that of the $22.7 billion worth of ICs manufactured in China last year, China-based companies produced only $8.3 billion (36.5%), accounting for only 5.9% of China’s $143.4 billion IC market. While TSMC, SK Hynix, Samsung, Intel, UMC and other overseas companies with IC fabs in China make the rest. ICInsights estimates that of the $8.3 billion in ICs produced by Chinese companies, about $2.3 billion came from IDMs and $6 billion from pure-play foundries such as SMIC.
If, as IC Insights predicts, China’s IC manufacturing industry will increase to $43.2 billion by 2025, China’s IC production will still only account for 7.5% of the total forecast 2025 global IC market of $577.9 billion. Even after a significant increase in IC sales by some Chinese manufacturers (many Chinese IC manufacturers are foundries who sell their ICs to companies that resell these products to electronic system manufacturers), China-based IC production Still may represent only about 10% of the global IC market by 2025. This will be far lower than the target set by China before. By 2025, my country’s chip localization rate needs to reach 70%.
Currently, China’s integrated circuit production is expected to achieve a strong CAGR of 13.7% between 2020 and 2025. However, this growth started from a relatively small base, considering that China’s IC production was only $22.7 billion last year.
ICinsights pointed out that even though Chinese memory start-ups YMTC and CXMT are building new IC production, IC Insights still believes that foreign companies will become a large part of China’s IC production base in the future.
ICinsights has previously highlighted that in discussions of China’s self-sufficiency in IC needs, many observers overlook a major issue, which is their lack of homegrown non-memory IC technology. There are no major analog, mixed-signal, server MPU, MCU or dedicated logic IC manufacturers in China, they said. And these IC product segments accounted for more than half of China’s IC market last year, dominated by entrenched foreign IC makers with decades of experience and thousands of employees. While everyone is focusing on China’s development in the memory market, self-reliance in the non-memory IC field is a more difficult problem for China. IC Insights believes that it will take decades for Chinese companies to become competitive in non-memory IC products.
At present, China is facing bravely in terms of future integrated circuit industry capabilities, they said. However, given the extremely small and untapped start-up of today’s Chinese companies’ IC production and technology, and the increasing difficulty of purchasing advanced semiconductor manufacturing equipment, IC Insights believes that China is aiming to achieve chip (memory and non-memory) self-sufficiency. Significant progress is unlikely to be made in the next five years or even the next ten years.
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