2018 domestic semiconductor equipment demand is expected to exceed 70 billion yuan
China's integrated circuit equipment industry is entering a period of rapid growth. In recent years, the semiconductor sector has drawn significant attention, and this year's two sessions have further fueled the industry's momentum. While the current enthusiasm is high, it is important to recognize that local manufacturers are still in the early stages of development within the global semiconductor supply chain. However, the domestic integrated circuit industry is currently experiencing its most favorable opportunity. The "policy, industry, finance, and innovation" model is working in unison, a rare combination that has never been seen before.
In terms of policy support, China's manufacturing strategy places the development of the integrated circuit industry at the forefront. Initiatives such as the National Integrated Circuit Industry Development Promotion Program, major science and technology projects, and the second phase of the big fund highlight the government's strong commitment. This is driven by the fact that the domestic market is highly fertile. In 2017, the import value of China’s integrated circuit products reached $260.1 billion, reflecting strong domestic demand.
Domestic integrated circuit imports amounted to $260.1 billion. The demand for domestic semiconductor equipment in 2018 is expected to exceed 70 billion yuan. The proportion of domestic semiconductor equipment investment has also 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 this figure will surpass $11 billion by 2018, making China the second-largest market for semiconductor equipment worldwide. We believe that the Chinese semiconductor market is just beginning, and once it enters its full growth phase, demand will increase rapidly.
The development history of China's semiconductor equipment shows that the industry is still in its early stages. Over the years, key milestones include: 2000 – the start of R&D on IC equipment like etchers, ion implanters, and lithography machines; 2008 – layout for key equipment and materials; 2010 – entry into production line assessments; 2014 – batch applications of key equipment and materials; and 2017 – verification of 14nm-level domestic equipment. By 2017, China had achieved notable progress in R&D, market development, and capital operations, with over 3,688 patents filed. At the market level, more than 88 million units of domestically produced equipment were accumulated, and sales exceeded 400 units. In terms of capital markets, companies like North Huachuang, Shengmei Semiconductor, Changchuan Technology, and Jingsheng Electromechanical have successfully opened up financing channels.
North Huachuang, for example, participated in major national projects such as the 863 Special Project and the 02 Special Project in 2003 and 2008. The company started developing semiconductor equipment in 2000, entered the production line with prototypes in 2010, and began mass production in 2014. In 2017, its 14nm-level equipment entered batch testing.
The gap between domestic and international equipment is narrowing. A comprehensive system for domestic equipment and parts has been established. Various enterprises have reached the 14nm node, including North Huachuang, Shengmei, Shanghai Zhongwei, and Shenyang Tuojing. Domestic companies have developed a supplier system through independent research and development.
From the perspective of sales revenue, the domestic semiconductor equipment industry saw a significant increase. In 2016, sales reached 5.7 billion yuan, with a CAGR of over 17% from 2013 to 2016. The proportion of integrated circuit products in semiconductor device sales revenue increased gradually, from 34% in 2013 to 29% in 2016. By 2020, domestic equipment is expected to account for over 20% of the mainland market.
Although China's semiconductor equipment has not yet achieved large-scale presence in the integrated circuit field, it has reached the international mainstream level in photovoltaics and LEDs, with the ability to set up lines and sell them both domestically and internationally. The photovoltaic and LED sectors, which were once dominated by foreign technology, have seen a transformation due to the efforts of domestic manufacturers.
Recent developments in North Huachuang show that the company, formed by the merger of Northern Microelectronics and Qixing Electronics, offers seven product series covering eight application fields, including integrated circuits, power semiconductors, new energy photovoltaics, and flat panel displays. From 2013 to 2017, annual shipments increased by 300-400 units, with an estimated 1,300 units in 2017.
Shengmei Semiconductor Equipment (Shanghai) made headlines by listing on NASDAQ in November 2017, marking the entry of Chinese semiconductor equipment into the global stage. Cleaning plays a crucial role in the semiconductor industry, with more than one-third of the processes being cleaning steps. As nodes shrink, the need for advanced cleaning solutions increases significantly.
The global cleaning equipment market was valued at $2.7 billion in 2016 and reached $3.23 billion in 2017. With new Fab construction, old Fab upgrades, and increased cleaning processes, the market is expected to double in the next five years, reaching $60-70 billion. Shengmei leads in cleaning technology, with its SAPS technology offering superior efficiency compared to traditional methods.
Semiconductor equipment is moving along with manufacturer migration. Historically, Silicon Valley, Japan, and Korea/Taiwan have been centers of semiconductor activity. Now, China is poised to become the 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 supports the balanced development of the domestic industrial supply chain, working closely with domestic equipment and material suppliers to promote innovation and sustainability.
During a roundtable discussion, investors highlighted the importance of long-term growth, competitive strength, and company values when investing in the semiconductor industry. Manufacturing companies like Hua Hong stressed the need for localization to reduce costs and improve responsiveness. They also emphasized the importance of collaboration across the industry chain to ensure sustainable growth.
For domestic semiconductor equipment companies, learning from global giants like Samsung and Hynix is essential. Focusing on service quality, customer communication, and product reliability can help bridge the gap with international competitors. Although initial costs may be higher, long-term returns are promising, especially with financial support, strategic planning, and a strong team. With these factors in place, China's semiconductor equipment industry is well-positioned to thrive in the next 5–10 years.
Cixi Xinke Electronic Technology Co., Ltd. , https://www.cxxinke.com