Chinese Self-sufficiency
Due to the rapid growth of the smart device and PC markets in China, the self-sufficiency rate of semiconductors is expected to increase very quickly in China. The Chinese government is focusing on supporting companies that design system semiconductors, and major semiconductor companies including Samsung Electronics and SK Hynix are expanding their local production in China.
The growth of the Chinese market can temporarily help the Korean semiconductor industry, which has the greatest global market share. However, Chinese companies might grow fast enough to beat Korean companies.
According to recent reports of IC Insights published on Oct. 15, the size of the Chinese semiconductor market almost doubled, from US$5.6 billion in 2008 to US$9.8 billion this year. This market is expected to grow to US$13.5 billion by 2018. The self-sufficiency rate in semiconductors in China will increase from 8.7 percent in 2008 to 16.0 percent by 2018.
The demand for semiconductors related to electronic devices in China is rapidly growing. According to market research company Gartner, the global market share of Chinese smartphone companies increased from around seven percent in 2011 to 28 percent last year. In the PC and server market as well, Chinese companies such as Lenovo are expanding their market share quickly.
This phenomenon is primarily due to aggressive M&As of Chinese companies. The Chinese PC manufacturer Lenovo decided to acquire Motorola Mobility from Google at US$2.9 billion. It is continuing its aggressive actions in the PC, mobile, and server industries, for example, by acquiring the x86 server business from IBM.
The growth in the Chinese market is accelerating Korean companies to expand to China. SK Hynix is manufacturing almost half of its total DRAM production at the Wuxi semiconductor factory located in Jiangsu Province, China. Samsung Electronics is also manufacturing first-generation V-NAND Flash at the Xi’an factory.
However, some within the industry are worrying if Chinese companies might dominate the memory semiconductor market ultimately with the economy of scale. Joo Dae-yong, a chief researcher at the Korea Institute for Industrial Economics and Trade, said, “The Chinese government is trying to change the paradigm of the global semiconductor market which has been led by Korea, the U.S., and Japan by providing supportive policies. China might want to enter the memory semiconductor industry.”