China’s chip localization is accelerating, and Japan is expected to become the biggest winner

Foreword:

In the near future, the pattern of the international chip market may be undergoing drastic changes. Due to the acceleration of the localization of Chinese semiconductors, the monopoly of chips by the United States and South Korea is expected to be broken, and Japan is expected to become the biggest winner.

Japan occupies an important position in global semiconductor supply

In the field of semiconductor materials, there are 19 essential materials required for chip production. Japan accounts for more than 50% of 14 important materials such as silicon wafers, synthetic semiconductor wafers, and photomasks. The industry has maintained its advantages for a long time. It is no exaggeration to say that if there is no supply from Japanese companies, global semiconductor manufacturing will suffer.

In the field of semiconductor equipment, among the 26 necessary types of semiconductor equipment, Japanese companies account for more than 50% of the market share in 10 types of equipment. Especially in important front-end equipment such as cleaning equipment and oxidation furnaces, they almost monopolize the market.

In the global semiconductor field, among the three trump cards of semiconductor production, the United States holds the design tools and manufacturing equipment; while Japan holds the semiconductor materials.

At present, Japanese companies have an overall market share of 52% in the global semiconductor materials market. They have obvious advantages in key materials such as silicon wafers, photoresists, masks, conductive adhesives, molding compounds, and lead frames. They have Shin-Etsu and Mitsubishi Top global semiconductor materials suppliers such as Sumitomo, JSR, Hitachi Chemical, Kyocera, etc.

In most key areas such as cleaning equipment, lithography machines, homogenizing development equipment, ion implantation equipment, etching equipment, heat treatment equipment, wafer inspection equipment, chip testing equipment, etc., Japan has maintained its competitive advantage for a long time and is one of the top ten semiconductor equipment companies in the world. Japanese companies can appear in ACCCIM.

While my country is vigorously promoting the localization of chips

In June of this year, sales of Japanese semiconductor manufacturing equipment reached 180.4 billion yen, a year-on-year increase of 31.1%. At the same time, as China vigorously promotes the localization of chips, China’s semiconductor equipment expenditure will increase by an average of 31% annually in the next five years. Japanese companies have obvious advantages in participating and are expected to greatly benefit from it.

The increase in manufacturing investment by Chinese semiconductor manufacturers and the strong market demand for terminal products seem to have boosted the sales of Japan’s semiconductor business.

According to relevant statistics, in 2018, China’s mobile phone, computer, and color TV industries, which consume chips, produced 1.8 billion, 300 million, and 200 million respectively, accounting for more than 90%, 90%, and 70% of the world. The market can fully support the output of the enterprise.

Qorvo, Sijiaxun, New Broadcom, and Murata account for almost 80% of the global RF market share. With the advent of the 5G era, China has begun to have its own technological advantages in the 5G field, and it must master its own RF chips.

In addition, my country is the world’s largest mobile phone production base, and mobile phone sales of domestic brands such as Huawei, vivo, oppo, and Xiaomi account for more than 50% of the world’s total.

Although Japan has experienced a sharp decline in the field of chip design, especially in memory, it still has advantages in materials and equipment and some market segments. Fine chemicals are the basis for the development of semiconductor-grade materials in Japan, and it still maintains its advantages.

It is precisely because Japanese semiconductors are in such a state of development that the Chinese and Japanese semiconductor industries have huge room for complementary and cooperative development.

Japan’s leading chip manufacturing level has also formed a good complement to my country’s strong demand for chips.

Chinese and Japanese semiconductor companies benefit from each other due to the environment and policies

The State Council recently issued “Several Policies to Promote the High-quality Development of the Integrated Circuit Industry and Software Industry in the New Era”. According to data, my country’s chip imports in 2019 were US$304 billion, far exceeding the second-ranked crude oil imports.

According to data from the State Council, China’s chip self-sufficiency rate will reach 70% by 2025.

This month, China introduced new tax incentives to chip makers, and China has set up a national fund specifically to invest in the semiconductor industry.

So far this year, a number of chip companies have conducted initial public offerings on the Shanghai Science and Technology Innovation Board, raising hundreds of billions of dollars in funds.

This means that as Chinese companies increase their production capacity, there will be more demand for chip manufacturing tools, and companies like Tokyo Electronics will benefit from it.

This month, Chinese chip foundry company SMIC increased its planned capital expenditure for 2020 to US$6.7 billion; previously, the company raised US$7.7 billion through an IPO on the Shanghai Science and Technology Innovation Board. This capital expenditure figure was estimated at the beginning of the year of 3.1 billion. More than twice the dollar.

Tokyo Electronics focuses on the front-end chip manufacturing process, and is particularly strong in products such as etching machines and coaters/developing machines: the latter has a market share of 91%.

In the 12 months ending in June, China accounted for approximately one-fifth of Tokyo Electronics’ semiconductor equipment sales, so increased spending in China will put the company in a favorable position in terms of profitability.

Acquired Pioneer Micro Technology of Japan Chip Lithography Machine

To build a fully independent production line, the first step is the lithography machine. The lithography machine is the key equipment for manufacturing chips. my country has a big shortcoming in the field of lithography machine.

But recently, the Chinese company Yingtang Zhikong said that the Japanese chip semiconductor lithography machine Pioneer Microtechnology that the company plans to acquire has now been approved by the Japanese government.

Pioneer Microtechnology lithography machines are mainly used for the manufacture of analog chips, which is undoubtedly good news for promoting the development of domestic chips.

For high-end digital chips such as mobile phones and computers, Pioneer Microtechnology has little capability, but it can have a good performance in the industrial field. It can be seen that once the acquisition is successful, in the industrial chip field, the future of domestic chips can be expected.

Huawei’s increased cooperation with Japan is the general trend

In 2019, Huawei purchased parts and components from Japanese companies about 1.1 trillion yen (about 71.45 billion yuan), an increase of about 50% over the same period in 2018. It is worth noting that the amount of parts Huawei purchased from Japanese companies in 2018 was 721 billion yen, which has skyrocketed by 200% since 2015.

Japan occupies a very important position in the global supply chain. Its parts industry supports the production of 1.4 billion smartphones per year. In addition, Huawei has established long-term and stable cooperative relations with Japanese suppliers.

Earlier reports have also pointed out that Japanese company Panasonic will increase the production of 5G Electronic materials in China, and plans to start adding production equipment in its factory in Guangzhou, Guangdong Province in June, and start production in the fall of 2021, with an investment of approximately 8 billion yen. , The company plans to increase production capacity to 1.5 times the original.

It is expected to be mainly used to meet the needs of 5G base station antennas, servers and routers. It is estimated that they will be provided to Chinese communication equipment manufacturers Huawei and ZTE through circuit board manufacturers.

Japan is investing heavily in soliciting TSMC to build plant

Although Japanese semiconductors have a large share of the world, most of them are in the fields of semiconductor materials, equipment, and storage. TSMC and Samsung are still leading high-end chip manufacturing.

Japan has thrown an olive branch to Intel and TSMC, and plans to provide overseas chip manufacturers with a total of hundreds of billions of yen (equivalent to billions of dollars) in the next few years.

The Japanese government hopes to integrate the world’s powerful semiconductor manufacturers to establish factories in the country, not only to master advanced technology, but also to ensure the stable supply of related semiconductor component and equipment manufacturers in Japan.

Japan plans to build an advanced chip foundry, coincidentally with the United States in inviting TSMC, perhaps Japan also predicted its own shortcomings.

It can be seen that the relationship between China and the United States affects China, Japan, and the United States and Japan. It broke the original global industrial chain. Japan’s plan to invite TSMC to build a foundry is also a long-term strategic consideration, and it is also worried that the United States will start with itself for the second time.

End: Long-term development cannot count on other countries

In the context of the strengthening of the encirclement of the United States, it can be expected that mainland China will approach Japan, and Japanese companies can participate in the rear support for the cultivation of China’s semiconductor industry.

For China, which is in trouble due to the US embargo, the key to mastering the localization of semiconductors is Japanese companies. Japanese companies also believe that the opportunity to expand their performance has arrived.

But China can only pin its hopes on itself, not on Japan. TSMC is not a US company, but in the face of threats from the US, TSMC has nothing to do.

For mainland Chinese companies like Huawei, it is necessary to form an industrial group with integrated capabilities. The Chinese market is also large enough and capable enough that we are fully capable of developing our own chip industry.