Despite the global semiconductor industry's weakening demand in the first half, China's semiconductor industry continued to perform stably with sales rising 11.8% on year during the period, but the growth was still weaker than that of first-half 2018, according to Digitimes Research's figures.
The China semiconductor industry's short-term development is likely to continue being constrained by a weak economy, US-China trade tensions and a lack of advanced technology and talent. However, for the medium to long term, demand created by emerging technologies and support from government policies are still expected to drive China's semiconductor market growth.
Of the global semiconductor industry's sales in the first half, over 30% were contributed by China, the largest semiconductor market. However, the China semiconductor industry's rapid growth cannot be achieved without the strong support by government policies and funds. Sales of China's semiconductor industry in 2018 doubled from those in 2014 with the IC design sector having particularly strong growth.
Cities in the eastern coast of China are still the key hub of the country's semiconductor industry, but several western cities including Xian, Chengdu and Wuhan, have also been aggressively developing semiconductor applications and are poised to become another hub for the industry, Digitimes Research believes.
Despite the effort of the China government nurturing the local semiconductor supply chain, it still cannot function independently much, especially in the IC design segment. Currently, China-based players can only supply less than 5% of ICs for high-end and specific applications, and the problem is becoming more critical because of the trade war between China and the US.
In the IC design sector, China has been accelerating local capability in the entry-level to mid-range segments, but it still depends heavily on US-based ICs in the high-end segment.
China's development in IC manufacturing and packaging/testing is more mature than IC design, and local players in the fields are able to replace or compete against non-China players, but for more advanced manufacturing technology, China currently still relies on Taiwan.
As for raw materials and equipment, Chinese suppliers only have a very small presence and the industry is highly dependent on the US and Japan for supply.