China to become the largest semiconductor producer

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China has long been the largest market for semiconductors, accounting for over 50% of the global market for the last five years. According to Semiconductor Intelligence, China is now on track to become the largest semiconductor manufacturer in the next few years.

China IC imports surged 47% from $157 billion in 2010 to $231 billion in 2013. However, since 2013 imports have been flat in the $218 billion to $231 billion range. China IC exports tripled from $29 billion in 2010 to $88 billion in 2013. In the last three years, exports have dropped back to the $61 billion to $70 billion range. China’s domestic IC industry has exploded over the last six years, tripling in size from $21 billion in 2010 to $65 billion in 2016. The fastest growing segment has been IC design, increasing 5 times from $5 billion in 2010 to $25 billion in 2016.

The data shows China is increasingly furnishing its IC needs internally, become less dependent on non-Chinese IC companies. China’s growing production of semiconductors is reflected by wafer fab equipment spending trends over the last ten years. According to data from SEMI and SEAJ, China purchases of fab equipment grew 180% from $2.3 billion in 2006 to $6.5 billion in 2016. Over the same period, fab equipment purchases declined 50% in Japan and 39% in both North America and Europe. South Korea grew 10% and Taiwan grew 67%. In 2016 China trailed behind Taiwan at $12.2 billion and South Korea at $7.7 billion. However, SEMI expects China will be the largest fab equipment market by 2019.

Thus China’s electronics industry is becoming less dependent on foreign electronics companies. In the same manner, China’s developing semiconductor industry will make the nation less dependent on foreign semiconductor companies. Chinese semiconductor companies will increasingly design and manufacture devices to support Chinese electronics companies. Eventually, the Chinese semiconductor companies will be serious competitors for business outside of China.

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