2018 domestic semiconductor equipment demand is expected to exceed 70 billion yuan
China's integrated circuit equipment industry is experiencing a period of rapid growth. In recent years, the semiconductor sector has captured significant attention, and this year’s Two Sessions have further fueled the current enthusiasm. However, it's essential to recognize that domestic manufacturers are still in the early stages of the global semiconductor supply chain. Despite this, the development of China’s integrated circuit industry is now at its most promising stage, with policy, industry, finance, and innovation working together in an unprecedented way.
In terms of policy support, the national strategy for manufacturing places a strong emphasis on the development of the integrated circuit industry. Initiatives such as the National Integrated Circuit Industry Development Promotion Program, major science and technology projects, and the second phase of the big fund all reflect the government's commitment. The reason behind this focus is the vast potential of the domestic market. In 2017, China imported integrated circuit products worth $260.1 billion, indicating a robust demand.
Domestic integrated circuit imports reached $260.1 billion, highlighting the scale of the market. In 2018, the demand for domestic semiconductor equipment is expected to exceed 70 billion yuan. The proportion of investment in domestic semiconductor equipment has been increasing steadily. In 2000, China's integrated circuit capacity accounted for only 2% of the global total, but by 2016, it had risen to 11%. In 2017, China's semiconductor equipment demand was approximately $7 billion, placing it among the top three globally. It is anticipated that by 2018, this figure will surpass $11 billion, securing the second position worldwide.
The Chinese semiconductor market is still in its early stages, and once it fully matures, the growth in demand is expected to be substantial. The development of domestic semiconductor equipment has also been progressing. From 2000 to 2017, key milestones were achieved, including the initial research and development of critical equipment like etching machines, ion implanters, and lithography machines. By 2017, the country had made significant strides in technological innovation, with over 3,688 patents filed by the end of the year.
Companies like North Huachuang have played a pivotal role in this development. Since 2000, North Huachuang has been involved in the research and development of semiconductor equipment, entering production lines in 2010 and achieving mass production by 2014. In 2017, their 14nm-level equipment entered batch testing, marking a significant milestone.
The gap between domestic and international equipment is gradually narrowing. Major enterprises such as North Huachuang, Shengmei Semiconductor, Shanghai Zhongwei, and Shenyang Tuojing have reached the 14nm node in various technologies. A detailed table outlines the layout of different domestic semiconductor equipment products, showing that many companies have developed advanced technologies.
In terms of parts supply, domestic companies have formed a supplier system through independent research and development. Key components such as dry pumps, reaction chambers, MFCs, and targets are being produced by local manufacturers, serving both domestic and international clients.
From a sales revenue perspective, the domestic semiconductor equipment market has shown consistent growth. In 2016, sales reached 5.7 billion yuan, with a compound annual growth rate (CAGR) exceeding 17% from 2013 to 2016. The proportion of integrated circuit products in semiconductor device sales revenue increased from 34% in 2013 to 29% in 2016. By 2020, domestically produced equipment is expected to account for over 20% of the mainland market.
Although China's semiconductor equipment has not yet reached large-scale production in the integrated circuit field, it has achieved international standards in photovoltaics and LEDs. Domestic manufacturers have successfully set up production lines and sold them both domestically and internationally. This shift has disrupted traditional market dynamics, which were previously dominated by foreign technology.
North Huachuang, formed by the merger of Northern Microelectronics and Qixing Electronics, offers a wide range of products across multiple applications, including integrated circuits, power semiconductors, new energy photovoltaics, and flat panel displays. From 2013 to 2017, the company's annual shipments increased significantly, reaching an estimated 1,300 units in 2017.
Shengmei Semiconductor Equipment (Shanghai), listed on NASDAQ in November 2017, represents a significant milestone for China's semiconductor equipment industry. Cleaning processes play a crucial role in semiconductor manufacturing, with more than one-third of the processes involving cleaning. As node sizes decrease, the number of cleaning steps increases, making cleaning equipment a rapidly growing market.
Shengmei's SAPS technology has positioned it at the forefront of cleaning equipment, offering superior efficiency compared to traditional methods. The global cleaning equipment market reached $2.7 billion in 2016 and is projected to grow to $3.23 billion in 2017, with potential to double in the next five years.
Semiconductor equipment is also evolving alongside manufacturer migration. Historically, Silicon Valley, Japan, and Korea/Taiwan have been centers of semiconductor manufacturing. Now, China is emerging as a global center, presenting opportunities for domestic manufacturers to grow and strengthen.
Shanghai Hua Hong, a leading semiconductor manufacturer, emphasizes the importance of building a win-win ecosystem for global development. The company collaborates with domestic and international suppliers to ensure high-quality equipment and materials, supporting the growth of the domestic semiconductor industry.
As the semiconductor industry continues to expand, the localization of equipment and materials becomes increasingly important. Localizing production can reduce costs, improve response times, and enhance the long-term sustainability of the industry. Companies like Shanghai Hua Hong are actively supporting the development of domestic equipment and materials manufacturers, aiming to create a balanced and sustainable supply chain.
Investment in the semiconductor industry requires a long-term perspective, focusing on competitive strength and endogenous growth. Companies must prioritize quality, customer service, and strategic partnerships to succeed in a highly competitive market.
Looking ahead, the future of China's semiconductor equipment industry appears promising. With financial support, a solid strategy, and a dedicated team, the industry is well-positioned to achieve significant growth over the next 5–10 years.
Cixi Xinke Electronic Technology Co., Ltd. , https://www.cxxinke.com