Industrial Intelligence Author Huang Xin
Machinery Intelligence
Research on Competitiveness Intelligence and Trade Risk Issues in the Equipment Manufacturing Sector
On February 18th, the U.S. Information Technology and Innovation Foundation (ITIF) released its report, "Moore's Law is Undermined: The Impact of China's Policies on Global Semiconductor Innovation" ("Report"). (hereinafter referred to as the "Report"). The report provides an overview of the development of the global semiconductor industry; analyzes the drivers and conditions for continued innovation in the semiconductor industry; and explores China's semiconductor industry policies and their impact.
Immediately following the event, President Biden signed the Executive Order on America's Supply Chains, directing a broad assessment of the supply chains for semiconductors, medical supplies, critical minerals, and high-capacity batteries.
The Executive Order on America's Supply Chains directs a broad assessment of the supply chain for semiconductors, medical supplies, critical minerals, and high-capacity batteries.
The importance of the semiconductor industry to the U.S. manufacturing industry, economy, and national security cannot be overstated.
Current Competitive Landscape of the Global Semiconductor Industry
1. U.S. Firms Account for Nearly 50 Percent of Global Sales but Weak Manufacturing Capacity
In 2019, U.S.-based semiconductor firms accounted for 47 percent of global semiconductor industry sales of the market (down about 5% from 51.8% in 2012), followed by South Korea (19%), Japan and Europe (10% each), Taiwan (6%) and China (5%).
However, as of 2019, the U.S. accounts for only 11% of the global semiconductor manufacturing market, while South Korea the proportion is 28%, China Taiwan 22% , Japan 16%, China 12% and Europe 3%. In 2015 2019, mainland China's share of the global semiconductor manufacturing market almost doubled . Until the end of 2020, there are only 20 semiconductor manufacturing plants (FAB) in operation in the United States.
2. The US, Europe, and South Korea lead in different areas of the semiconductor industry
Logic chips, memory chips, analog chips, and discrete chips are the four major areas of the semiconductor The four major segments of the semiconductor industry. In terms of market share in each major segment of the global semiconductor industry, in 2019, the United States is the clear leader in logic chips and analog chips; South Korea is the leader in memory (with the United States following closely behind); and Europe is the leader in discrete devices. China-based companies have a 9% share of the logic chip market and a 5% share of the discrete device market.
In terms of specific companies, Intel is the global leader in logic chips; Texas Instruments, ADI, and Infineon are the leaders in analog chips, with 19%, 10%, and 7% market share, respectively, as of the first quarter of 2020; Samsung, SK Hynix, and SK Hynix are the leaders in analog chips. SK Hynix) and Micron (Micron) in the field of dynamic random access memory (DRAM) is the leader, respectively, 44% of the global market share, 29% and 21%.
3. The global semiconductor industry chain has a high degree of participation, and each country has different value advantages
The semiconductor industry is highly globalized, with a large number of countries/regions competing in multiple aspects of semiconductor production, from semiconductor design, to manufacturing, and then to ATP (assembly, testing, and packaging). In each link of the semiconductor value chain, an average of 25 countries are involved in the direct supply chain and 23 countries are involved in the support function. More than 12 countries have companies directly engaged in semiconductor chip design, 39 countries have at least one semiconductor manufacturing plant, and more than 25 countries have companies engaged in ATP.
Each part of the semiconductor production process creates considerable value. The U.S. International Trade Commission (ITC) estimates that 90% of the value of a semiconductor chip exists in the design and manufacturing phases, and 10% of the value comes from ATPs.
One of the key drivers of the global semiconductor industry is specialization , as firms - or even entire clusters of industry ecosystems within countries For example, the Netherlands has an advantage in extreme ultraviolet (EUV) lithography; Japan in chemicals and production equipment; South Korea in memory chips; Taiwan, China in foundries; and Malaysia and Vietnam in ATP.
4. The U.S. Leads the World in Semiconductor Patent Applications
According to the U.S. Patent and Trademark Office (USPTO), which tracks data on semiconductor patents it grants, the U.S. is still in the lead in global semiconductor patents, although its share has declined from 43% in 1998 to 29% in 2018; Japan's share has fallen by about 1/3, from 33% to 23%; followed by Taiwan, China and South Korea; the EU in fifth place; and mainland China in sixth place, accounting for about 6% of global patents. China's lag is even more serious when the number of patents per billion dollars of GDP is calculated. For every $1 billion of GDP, there are 310 patents granted to U.S. semiconductor companies and only 77 patents granted to Chinese semiconductor companies.
5. China's share of global semiconductor industry value added continues to climb
In terms of share of global semiconductor industry value added, in 2001-2016, mainland China's growth rate almost quadrupled from 8% to 31%; the US's share declined from 28% to 22%; and Japan's share declined more than two-thirds from 30%. more than 2/3, from 30% to 8%; Taiwan, China's share grew from 8% to 15%; South Korea's share grew from 5% to 10%; and Germany and Malaysia each had a 2% share.
6. Exports of the semiconductor industry from all major countries (regions) in the world except Japan and the United States grew
In 2005 2019, exports of the semiconductor industry in mainland China grew from US$27.8 billion to US$138 billion; in Taiwan, China, from US$35.9 billion to US$111 billion; in South Korea, from US$30.9 billion to $92.4 billion; and EU27 + UK from $69.4 billion to $81.6 billion. Meanwhile, U.S. exports remained roughly constant, at $53.1 billion in 2005 and $52.9 billion in 2019; Japan's exports declined slightly, from $47.9 billion to $46.9 billion.
7. Semiconductors are one of the most R&D-intensive industries in the world
Semiconductors, along with biopharmaceuticals, are among the most R&D-intensive industries in the world. In the 2019 EU Industrial R&D Investment Scoreboard (2019 EU Industrial R&D Investment Scoreboard), the top 13 semiconductor companies invested 18.4% of their sales in R&D, surpassing the biopharmaceutical industry. Among them, the top three are Qualcomm of the United States, China Taiwan's MediaTek and AMD of the U.S. And in terms of actual investment (actual investment), Samsung led with 14.8 billion euros (about $17.6 billion), Huawei followed with 12.7 billion euros (about $15 billion), and Intel (Intel) ranked third with 11.8 billion euros (about $13.7 billion). ) in third place.
As of 2018, semiconductor R&D investment as a percentage of sales for U.S.-based companies was 17.4%, Europe 13.9%, Taiwan, China 9.9%, Japan 8.8%, China 8.4%, and South Korea 7.3%. The R&D intensity of the European semiconductor industry has declined from 16.5% in 2010 to 13.9% today. In contrast, the R&D intensity of Chinese semiconductor companies has risen from 6.3% in 2012 to 8.4% in 2018.
8. High capital investment in the semiconductor industry
Semiconductors are also capital-intensive.In 2019, global capital expenditures (CapEx) in the U.S. semiconductor industry totaled $31.9 billion, or 12.5% of sales, second only to the U.S. alternative-energy sector ( alternative-energy sector). In terms of global CapEx, in 2019, South Korea-based companies' CapEx for the semiconductor industry accounted for 31% of global CapEx for the sector, followed by the US (28%), Taiwan (17%), China (10%), Japan (5%) and Europe (4%).
The expertise, capital, and scale required to develop new semiconductor designs or build new semiconductor fabs is very high and growing. For example, the cost of advancing a chip design from 10 nm to 7 nm has increased by more than $100 million, and the cost of advancing from 7 nm to 5 nm may have doubled again, from $300 million to nearly $550 million. But that's just the cost of designing the chip. It is estimated that as of 2020, the average cost of building a new 14 16 nm fab will be $13 billion; a 10 nm fab will cost $15 billion to build; a 7 nm fab will cost $18 billion; and a 5 nm fab will cost $20 billion to build.
China's pivotal role in the global semiconductor industry
1. China's growing semiconductor strength
China's semiconductor strength is growing rapidly, both from a chip design and manufacturing perspective. For example, in 2010 2015, the number of IC design companies in China increased from 485 to 715. In 2005 2015, China's semiconductor industry grew at a CAGR of 18.7%, and semiconductor consumption grew at a rate of 14.3%, compared to the global semiconductor market's CAGR of only 4.0%.
Currently, about 20% of the world's fabless IC design companies are located in China. As stated in a Deloitte report, "In terms of IC design, mainland China's capabilities have surged over the past five years and have begun to catch up with Taiwan and South Korea to become a major player in IC design in the Asia-Pacific region."
2. The Chinese market is important to U.S. semiconductor companies
The Chinese market is quite important, and accounts for a significant portion of many U.S. semiconductor companies' revenues. For example, in the first four months of 2018, the Chinese market accounted for more than 60% of Qualcomm's revenues, more than 50% of Micron's, about 45% of Broadcom's, and more than 40% of Texas Instruments'.In 2018, about 36% of U.S. semiconductor companies' revenues, or $75 billion, came from sales to China.
3. China's semiconductor industry has seen rapid revenue growth but low net profit margins
By the end of 2019, the 136 largest semiconductor companies in the world generated revenues totaling $571.8 billion. Among them, China-based companies accounted for $41.3 billion, or more than 7.2% of global revenue. Chinese companies accounted for 21% ($6 billion) of global packaging and testing services (OSAT) revenues; 8% ($4.5 billion) of foundry revenues; and 7% ($29.6 billion) of chip design and manufacturing revenues.In 2015, Chinese companies accounted for 4% of global semiconductor industry revenues. This shows that in 2015 2019, the revenue share of Chinese companies almost doubled.
Despite the rapid growth of the Chinese semiconductor industry's revenues, its net profit margins are a fraction of those of companies such as Intel, Samsung, TSMC, SK Hynix, and Micron. On average, non-Chinese semiconductor companies posted a net profit margin of 19.4% in 2019, compared to 12.1% for Chinese semiconductor companies .
What the Think Tank Suggests for Future Measures Against China
The report says China is distorting the global market through its "mercantilist" policies, discouraging innovative companies from developing and investing in research and development (R&D), and undermining the semiconductor industry's "Moore's Law". "Moore's Law". The report makes recommendations to address the "China Challenge" at both the international level and the U.S. domestic level (implementing the Creating Healthy Incentives for Chip Production (CHIPS) Act, and increasing federal investment in semiconductor R&D). Among the recommendations at the international level are:
1. Expanding the WTO on Subsidies
Under the WTO, three elements are required to qualify financial assistance as a subsidy: 1) a financial contribution; 2) it is given by a government or public *** agency; and 3) the proceeds from the granting of such a contribution.
Therefore, the United States should work with like-minded countries and the WTO to update its rules to impose tougher conditions and penalties on aggressive industrial subsidies. First, clarify the definition of a "public ****ing agency" and expand it to include state-influenced entities, such as state-owned enterprises and private companies. At the same time, it requires that subsidies given to state-owned enterprises do not harm other countries.
Like-minded countries should focus on dramatically improving the transparency of subsidies globally, including by insisting on timely and complete notification of subsidies and establishing a presumption of harm for subsidies that are not notified in a timely manner. Countries should also convene an annual meeting between WTO members and the WTO Appellate Body to discuss patterns and challenges associated with the excessive use of subsidies.
2. Allies should cooperate on semiconductor export controls
For the global semiconductor industry, China is both an important market and a key production location. Export controls on the core technologies that have underpinned China's economic and military rise will undoubtedly be a tool for serious consideration by policymakers. However, as ITIF has previously argued, the United States should do its best to work with like-minded countries to coordinate export controls, "because export control regimes are most successful when they are internationally coordinated." As stated in Section 4811(5) of the Export Control Reform Act (ECRA), "Export controls shall be coordinated with the multilateral export control system. Multilateral export controls are most effective and should focus on core technologies and other items that can be used to pose a serious national security threat to the United States and its allies."
The report suggests that previously the US has continually pursued unilateral export controls in pursuit of economic or trade policy objectives. A new approach to controls needs to emerge between it and the traditional Wassenaar Agreement (WA), which represents specific semiconductor (including semiconductor manufacturing equipment) industries and a broader range of advanced technologies. Therefore, the United States should refrain from imposing unilateral export controls and seek to develop a more ambitious and effective plurilateral (plurilateral) approach to export controls with countries (regions) with indigenous semiconductor production capacity, such as Germany, Japan, South Korea, Taiwan, China, the Netherlands, and the United Kingdom***.
These countries should work ****together to reach a **** understanding of the threat to the global semiconductor industry posed by firms from non-market economies, and of the pace and progress of semiconductor technology development. These countries should then establish working groups outside of WACA, known as "mini WACA", to define semiconductor technology and related controlled items (outside of the scope of existing controlled items), and to develop ****similar licensing policies.
3. Harmonizing the Foreign Direct Investment Review Process
The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) directs the Committee on Foreign Investment in the U.S. (CFIUS) to establish a formal process for sharing information with allied governments and to coordinate and collaborate on investment security issues. coordination and cooperation on investment security issues. Accordingly, the United States should continue to work with like-minded countries to harmonize the investment review process and consider expanding its list of excepted foreign states to include France, Germany, the Netherlands, Italy, Japan, and South Korea.
4. Enhance information sharing to combat foreign economic espionage and the theft of intellectual property, technology, or trade secrets
The United States should lead a broader Five Eyes Coalition of like-minded countries dedicated to working together to against state-sponsored espionage in advanced technology. The organization could compile a list of companies and individuals who are attempting to commit intellectual property theft, and develop mechanisms to limit their ability to compete in allied markets.
5. Allied cooperation in semiconductor R&D
The breadth and complexity of semiconductor innovation means that there is an opportunity to recruit like-minded countries to participate in long-term, high-potential research and development programs, such as "semiconductor moon shots. moon shots". This is actually anticipated by the bipartisan CHIPS for America Act, which calls for the establishment of a $750 million Multilateral Security Fund to support the development and adoption of secure microelectronics technologies. In this regard, securing the microelectronics supply chain will be the first step and Congress will appropriate funds for this provision when it reviews the reauthorization of the National Defense Authorization Act (NDAA) this fall.
Summary
According to the 2020 Global Think Tanks Index report published by the University of Pennsylvania, ITIF ranked 39th among the top U.S. think tanks and 4th among the top science and technology policy think tanks in the world that year. Policy Think Tanks in the world. Its president, Rob Atkinson, has extensive experience working in the government sector, and his views have a certain degree of influence in the political world. Previously, many of ITIF's recommendations and initiatives have been adopted by the U.S. government.
ITIF has always been critical of China's technology and innovation policies, and has advocated strong countermeasures against China. The report's recommendations in the semiconductor area coincide with the Biden administration's idea of uniting allies, developing domestic manufacturing, and containing China, and are therefore likely to be adopted by the US government.