The year 2020 may become the watershed in the evolution of global supply chains with regionalization and demassification in high gear posing major changes to the world, and the semiconductor sector will play a pivotal role in the process, with China likely to embrace a new opportunity for its IC industry growth due to proliferating 5G, AIoT and EV applications, according Digitimes president Colley Hwang.

Hwang has worked with Digitimes Research analysts in exploring possible opportunities and challenges facing China's semiconductor industry and market amid the widespread coronavirus pandemic, worsening US-China trade tensions, growing market headwinds and changing consuming patterns.

Hwang said many businesses still entertain high expectations for business opportunities in China beyond 2020 thanks to its huge consumer market and ever-expanding 5G, AI, IoT and automotive electronics development.

IBS statistics show that China consumed US$212.2 billion worth of semiconductor products in 2019, which will balloon to US$624 billion by 2030. But China still sees relatively low semiconductor self-sufficiency, with 84.19% of semiconductor demand in China supplied by foreign vendors in 2019 and only 15.81% sourced domestically. China's IC self-supply ratio may grow to 39.78% by 2030, compared to 60.22% for foreign imports, according to an IBS research.

Digitimes Research tallies also indicate that China absorbed 25.75 million passenger and commercial vehicles in 2019, accounting for 30% of the world's total car sales for the year, and total shipments of new energy vehicles in China in 2019 reached 1.206 million units for a 60% share of the global total.

Unmatched competitiveness

Hwang said that China will boast unmatched competitiveness in the future automobile ecosystem, especially in the EV sector, given that six out of the world's top-10 EV battery makers are based in China, including BYD and Contemporary Amperex Technology. These leading Chinese homegrown makers have joined forces to build new industry standards while moving to build plants in Europe and South Korea.

Hwang continued that the digitalization trend driven by 5G, AIoT and EV applications will create immense semiconductor demand in the China market, prompting China to invest more in the semiconductor and panel sectors. He also expects the growing US-China rivalry to provide opportunities for Chinese semiconductor industry.

After suffering from an oversupply in 2019, the memory segment has experienced a turnaround since the start of 2020, with shipments surging impressively on growing demand for servers and PCs to support remote work and online learning amid pandemic-induced lockdowns, according to Tony Huang, deputy director of Digitimes Research.

He cited Digitimes Research estimates indicating that memory revenues may rebound to 30% of global semiconductor revenues in 2021 from 25.8% in 2019, which was down 7.9pp from 2018, and unit shipments of DRAM and NAND flash chips for handsets in 2021 are likely to rise 30% and 32.1% on year, respectively, compared with corresponding annual growth rates of 21% and 34.1% for server applications.

DRAM consolidation

Huang said DRAM industry consolidation has improved significantly over the years with the number of memory makers falling steadily from 34 in 1980 to only nine for the moment, and top-3 vendors Samsung Electronics, SK Hynix and Micron Technology together now dominate over 93% of global DRAM supply.

Now in China, Huang continued, Yangtze Memory Technologies (YMTC) has started volume production of 64-layer 3D NAND flash chips at a monthly capacity of 10,000 wafers in first-half 2020 and is set to enter production of 128-layer 256Gb chips by the end of the year. ChangXin Memory Technologies (CXMT) has also kicked off production of 19nm and 17nm DRAM chips, with monthly capacity to rise to 40,000 wafers by the end of 2020 from current 10,000-20,000 wafers.

Analyst Eric Chen noted 5G handset penetration in China will rise faster than 4G models, with its 5G smartphone shipments estimated to hit 112 million units in 2020 from only 13 million in 2019, which in turn will significantly fuel demand for 5G handset processors, baseband chips and RF devices. Chen added that China will complete construction of 700,000 5G base stations by the end of the year, likely to generate over US$10 billion in indirect business opportunities.

Analyst Jim Chien said Chinese makers are also stepping up the development of third-generation compound semiconductors. Sai Microelectronics, for instance, has set up subsidiaries in Shandong province to develop GaN-based epi wafer materials and devices; Dynax Semiconductor is engaged in IDM operations for GaN devices; and 6-inch GaAs foundry Wavetek Microelectronics has teamed up with United Microelectronics (UMC) to tap the market for high-performance power devices.

Source: DIGITIMES