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Press Release


TrendForce Reports Six Chinese Cities Vie for the Site of DRAM Fabs as the Central Government Fully Backs Domestic Semiconductor Industry

Tuesday , 04 / 07 / 2015 [ Analysts: TrendForce ]

On March 12, a Chinese consortium led by Summitview Capital announced its acquisition of Integrated Silicon Solution (ISSI), a fabless IC company listed on the NASDAQ, for 640 million USD. And with this acquisition, the Chinese government has officially declared its entry into the semiconductor manufacturing sector. The takeover of American-based ISSI is only the first step in the establishment of China’s domestic DRAM industry. Based on the findings of DRAMeXchange, a division of TrendForce, China consumed around 10.2 billion USD of DRAM in 2014, representing around 20% of the worldwide turnover. This huge internal demand is sufficient to support the development of a locally based DRAM industry. 

The newest reporting indicates that there are six local governments currently vying for central government’s approval to bring DRAM fabs to their areas. Only one candidate will be chosen and once the fabs are built, China will start to put together a vertically integrated supply chain. The consolidated companies in the upstream sector will be able to develop its own IPs and form strong links to the downstream sector. In addition to the clustering effect that will prevent DRAM fabs from leaving the country, the scale of China’s economy and its equally vast market will ensure sustained growth for the entire industry. 

Beijing, Shanghai, Hefei, Wuhan, and two other cities compete to be the center of China’s semiconductor industry 

Presently, there are six cities competing for the DRAM fabs, and prominent ones are Shanghai, Beijing, Hefei, and Wuhan. Beijing is an important market for China’s IC design, and it is where many returning graduates from foreign universities have landed. The city moreover has significant advantage in experts and expertise since it is the home of Tsinghua University, Institute of Microelectronics of Chinese Academy of Sciences (IMECAS), and Beijing Semiconductor Manufacturing International Corporation (SMIC). Thus, Beijing is considered the main trading hub of China’s consumer electronics. 

Shanghai, on the other hand, has the SMIC headquarter, and SMIC as a major semiconductor foundry is at the top of the IC industry chain in China. As for Hefei, it has in recent years gathered a group of talents in IC design with the help from the former CEO of Elpida Memory, Yukio Sakamoto. On the whole, all candidate cities have the potentials becoming the home of DRAM fabs. Their chances of success may be finally determined by the political influences and connections that local officials have with the central government. 

China’s semiconductor industry will affect the global DRAM market after three years at the earliest 

The Chinese government is aware that despite the right conditions and preparations (capital, market, and government support), the country’s nascent DRAM industry still lacks industry-related professionals and advanced manufacturing technologies. To address this issue, China’s Ministry of Industry and Information Technology in 2014 announced the establishment of the National IC Industry Investment Fund, which is worth 120 billion RMB. This fund lets the country gain a foothold in the DRAM sector using the quickest method, which is through acquisitions. In addition to the takeover of ISSI, Chinese investors have also set their sights on Taiwanese IC companies, which are known their strong R&D capabilities and global connections. Currently, the island’s regulations prohibit Mainland-based investors from holding more than a 30% stake in a listed local company, either directly or indirectly. Consequently, the Chinese may have to target American IC design houses or unlisted Taiwanese counterparts in order to increase China’s talent pool. 

Although the influence of China’s DRAM industry is becoming noticeable worldwide, DRAMeXchange expects the real effects will come later. It will take at least two years to build the fabrication plants and have them do pilot runs. As Chinese DRAM makers set up their manufacturing processes, they are likely to produce PC DRAM and specialty DRAM as their first line of products because they are technologically easier to make. Mobile DRAM has experienced rapid growths in recent years. However, it will take at least five to ten years before the Chinese DRAM makers can catch up with other first-tier manufacturers in terms of mobile DRAM production capacity.

 

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