Does the Chinese market of the semiconductor industry enter a period of increasing localization rate? 2018

The space prospect of semiconductor industry investment and equipment localization, the construction of wafer fabs in mainland China has reached a peak, and equipment localization is one of the keys to the rise of the industry. Between 2017 and 2020, there are 62 semiconductor fabs in production globally, of which 26 are located in China, accounting for 42% of the global total. China's local investment will become the main force for fab construction, under the escort of national policies and large funds.

Now the country has shown unprecedented support for the semiconductor industry. The release of the "National Integrated Circuit Industry Development Promotion Outline" has outlined clear goals for the development of the industry, and the establishment of the IC Industry Big Fund has provided much-needed development for the industry. financial support. We believe that the country's strong support and broad market space will effectively catalyze the construction of wafer fabs in mainland China.

At present, China’s large silicon wafers are heavily dependent on imports. At present, many Chinese companies are intensively starting silicon wafer projects. The bureau plans to deploy 8 inch and 12 inch silicon wafer enterprises to reach 11, and the scale of investment continues to rise. The localization of equipment is China’s undertaking of the semiconductor industry. One of the keys to transfer and realize the rise of industries. Semiconductor core equipment involves the competition of national basic science's comprehensive strength. It has the characteristics of high technical barriers, high value, and long R&D cycle. It is also the most difficult but crucial link in the semiconductor industry. Due to the complexity of semiconductor process flow and high dependence on equipment, equipment performance directly affects the product quality, process efficiency and yield of semiconductor manufacturing, and ultimately affects the profitability and global competitiveness of semiconductor companies. Therefore, China’s semiconductor industry has achieved independent development. With the rise of the control model, the completion of the localization of equipment links is one of the crucial links.

In 2018, the global equipment market may hit a record high, and the Chinese market has become a new engine for global growth. With the expansion of chip production capacity, the global semiconductor equipment market is on the rise. In 2018, it is expected to exceed the US$60 billion mark. The vigorous market demand for integrated circuits has driven the continuous upgrading of the industry and increased investment, which has strongly promoted the development of the integrated circuit equipment manufacturing industry. Therefore, the semiconductor equipment market is closely related to the prosperity of the integrated circuit industry. According to survey data, in 2017, the global semiconductor equipment sales reached a record high, reaching 56.6 billion US dollars/yoy+37%, and the compound growth rate from 2013 to 2017 was about 16%. According to survey data, the global semiconductor equipment market sales in 2018 are expected to reach 62.7 billion US dollars/yoy+11%. It will reach 67.6 billion U.S. dollars/yoy+8% in 2019, which is expected to hit new historical highs one after another.

The global share of China's equipment market continues to increase. In 2018, it is expected to surpass Taiwan and become the world's second largest market. In 2019, it may rise to the world's first place. China is expected to rank first in the world with $17.3 billion for the first time. In the past ten years, the global share of the Chinese mainland market has generally shown a significant upward trend, from 6% in 2008 to 15% in 2017. According to data surveys, the global share of the Chinese market is expected to increase significantly to 19% in 2018 and 2019 , 26%.

The equipment market in mainland China has expanded for five consecutive years. In 2018, it is expected to exceed the ten billion level for the first time and reach USD 11.8 billion/yoy+44%. In 2019, the trend may continue to reach USD 17.3 billion/yoy+47%. As the world's largest semiconductor consumer market, China's semiconductor industry continues to expand. With the continuous transfer of international production capacity to China, Chinese and foreign semiconductor companies have invested and built factories in China, and the demand for equipment in the mainland has continued to grow. Benefiting from China's entry into the peak of fab construction, the equipment market will continue to maintain rapid growth.

According to survey data, the semiconductor equipment market in mainland China is expected to reach US$118.1 billion in 2018 and 2019. Based on this estimate, the market size of the four major types of equipment of wafer processing equipment, test equipment, packaging equipment, and other equipment (front-end equipment, etc.) in 2018 was US$94, 1.1, 700, and 600 million, and the market size in 2019 They are 139, 1.6, 1.0, and 900 million US dollars respectively.

Among the wafer processing equipment with a relatively high market share, the space for lithography equipment, etching equipment, thin film deposition equipment, ion implantation, process testing, and other equipment is expected to reach 28, 19, 24, 5, 9 and 900 million in 2018, respectively. US dollars are expected to reach US$42, 28, 35, 7, 1.4, and 1.4 billion in 2019.

The calculation method for calculating the market space of wafer processing equipment in mainland China: Based on the investment in the construction of 12-inch and 8-inch wafer fabs in mainland China from 2018 to 2020, combined with the various wafer processing equipment (ie the equipment required by the wafer fab) The space proportion of similar equipment, predicts the market space of various wafer processing equipment in mainland China from 2018 to 2020. At the same time, optimistic, neutral, and pessimistic localization rate assumptions are made for the equipment space generated by domestic investment in wafer fabs to estimate the localization space of wafer processing equipment.

According to survey data, from 2018 to 2020, the investment in the construction of 12-inch and 8-inch wafer fabs in mainland China will reach 708.7 billion yuan (including 530.3 billion yuan from domestic enterprises, accounting for 75% of the total investment), with an average annual investment of 2362 100 million yuan (including 176.8 billion yuan from domestic-funded enterprises), we estimate that the total space for wafer processing equipment may reach 496.1 billion yuan (including 371.2 billion yuan from domestic-funded enterprises’ equipment space), and an annual average of 165.4 billion yuan (including domestic-funded enterprises Equipment space is 123.7 billion yuan). The forecast comes from the report "Historical Opportunities for Layout of Domestic Semiconductor Equipment" on September 11, 2018. Since most of the foreign and Taiwan-funded enterprises investing and building factories in mainland China are world-class semiconductor companies, it is more likely to purchase Chinese domestic equipment at this stage. Small, currently domestic-funded wafer fabs are expected to become the main source of domestic equipment purchases. According to a review of the companies that have released plans for silicon wafer factories in China, the planned investment in the construction of silicon wafer factories in mainland China will reach 71 billion yuan (many wafer projects have not yet clearly reached the production time, and are only on a long-term scale). The space for film manufacturing equipment may reach 49.7 billion yuan.

The main factors affecting the development of semiconductors come from the slower-than-expected breakthroughs in domestic integrated circuit manufacturing technology and lower-than-expected investment growth; the construction of domestic fabs has fallen short of expectations; and the technological breakthroughs of local semiconductor equipment companies have fallen short of expectations. However, combined with the recent surveys of 20 upstream and downstream companies in the semiconductor equipment industry chain and the analysis of industrial investment, the Chinese market is entering a critical period of increasing localization rate. Local equipment companies have full orders and growth trends are already present. Test equipment, etching equipment, silicon Film manufacturing equipment and other fields may take the lead in localization and achieve high growth in 18-20 years.