Cooperation will be a win-win way for the global semiconductor value chain

- Dec 10, 2019-

Cooperation will be a win-win way for the global semiconductor value chain

Recently, a seminar on "Promoting Cooperation in the Global Semiconductor Value Chain" jointly organized by the China Semiconductor Industry Association and the American Semiconductor Industry Association was successfully held. At the meeting, representatives of the Chinese and American semiconductor industry reached an agreement on the open nature of the global semiconductor value chain, emphasizing that China is an important part of the global value chain, and discussed how to benefit from the global value chain and what motivations allow it to further develop.

"In the future development of the semiconductor industry, we must cooperate and work together to promote the development of the industry. Only through communication can we understand; only through understanding can we reach a consensus; only through consensus can we come up with a solution; if we have a method, we can cooperate; with cooperation In order to develop together. "Said Xu Xiaotian, executive vice president of China Semiconductor Association.

The opening of the global value chain is the only way forward

"Global value chains have an open nature. Only when this industry is opened can the spirit of innovation and entrepreneurship be greatly enhanced," said Michael Murphree, Ph.D., University of South Carolina.

Michael Murphree believes that there is currently a "sea monster" in the global semiconductor industry. This "sea monster" is actually a kind of protectionism. He sings "we want to defend the honor of our country, we want to protect employment" with a beautiful song. Although it sounds good, the purpose is to protect yourself and the result is devastating.

Global value chain refers to the distribution of value added through a globally dispersed production network. This means that when an uncompetitive industry is opened, more forces will come in to innovate. This means that when the industry has common standards and trade barriers and investment barriers are low, companies can make global acquisitions and are willing to participate in acquisitions by foreign companies or government procurement. This means that when the industry entry threshold is lower, companies no longer need to invest too much resources to establish a complete industrial chain, so that the company's innovative spirit will be stronger.

Michael Murphree pointed out that as a vertically integrated industry, there are hundreds of billions of dollars in the semiconductor industry flowing in various links every day. If there are not so many barriers, as long as there are innovative ideas, they can quickly pass through a decentralized global production network Find the corresponding talents and complete the need for innovation.

However, the reality is that there are still some obstacles in the global value chain and the strength of the global industry chain is inconsistent. Not every small team can join the value chain at any point, nor does it mean that the same benefits can be obtained. At present, the companies that benefit the most from the global value chain are those who are at the front of the value chain and can control industry needs and set standards.

He said that semiconductor companies should win-win in the global economy. It is impossible for each individual region to generate the demand that drives the entire industry. For example, the standard-setters who can most benefit from global value chains must also take an open and cooperative path to truly succeed.

"It can be learned from past experience that what promotes the development and innovation of the semiconductor industry is specialization and diversification. Only by keeping as open as possible can we make our innovation faster and deeper." Michael Murphree said.

 To achieve this goal, we must be open, have common standards, protect each other's intellectual property rights, and have access to intellectual property rights. At present, many large international semiconductor companies are opening up their intellectual property portfolios. This is because the more people have access to these intellectual property rights, the more quickly they can innovate.

"We must be aware of the rise of protectionism. Global industries need to be open and mutually beneficial in order to continue. The advantages of global value chains cannot be achieved in a single country, no matter how diverse the ecosystem within that country is. It may be as comprehensive and innovative as the global system. All supply chains must be open and competitive in order to achieve mutual benefit. "Michael Murphree said.

China's participation in the global semiconductor value chain requires win-win cooperation

"Chinese semiconductors are closely integrated with the global semiconductor industry chain, and their development is the development of the world's semiconductors. The two cannot be narrowly opposed. The key lies in the peaceful pursuit of common interests in each country in order to achieve a win-win situation and achieve a better and larger Achievement. "Wei Shaojun emphasized.

The trend of China as a major manufacturer of electronic products will not change. In recent years, the output of Chinese electronics products in the world has continued to increase. According to US IBS data, the global share of Chinese mobile phone manufacturing increased from 47% in 2009 to 84% in 2014; the global share of color TV manufacturing increased from 45% in 2008 to 66% in 2014; The global share increased from 58% in 2008 to 81% in 2014.

However, in terms of specific value, China's annual mobile phone production exceeds 1 billion units, but has been at the low end of the value chain. Take a mobile phone that sells for $ 748 in the current market as an example, of which the manufacturing cost accounts for only $ 4.5. Even the earphones and charger in the box cost $ 5. The manufacturing cost does not even reach the value of the contents of the box.

Wei Shaojun pointed out that such a long-term imbalance in the value chain will lead to unsustainable models, and this division of globalization will be broken. Although China's electronics manufacturing industry is large in scale, it has been at the low end of the industrial chain for a long time. It is inevitable to turn to the high end of the value chain. It is also inevitable to increase the value through the development of chips.

According to CSIA statistics, sales of Chinese semiconductors have grown rapidly in recent years, reaching a year-on-year increase of 19.7% in 2015, reaching 360.9 billion yuan (about 60 billion U.S. dollars). But judging from the most comparable Fabless sales, it is not optimistic. In 2015, China's IC design industry sales were 132.4 billion yuan. This means that if China's own products can be sold in China, it will only account for 7% ~ 8% of total demand.

"Although China's IC industry is developing rapidly, it is small in scale and not high in quality. The main problem is that the capacity defects are very serious. On the one hand, the local Foundry is mainly for external global partners. On the other hand, our Fabless The resources of global partners are being used. "Wei Shaojun pointed out.

 The combined production capacity of China's semiconductor manufacturing industry currently only accounts for 11% of global production capacity. Therefore, the foundry and IP core business that China's Fabless company mainly uses also comes from global partners. "But due to the tight global advanced production capacity in the past 2 years, the loss growth rate of our Fabless company is at least 5 percentage points." Wei Shaojun said.

He said, "If the Chinese semiconductor industry wants to do this, it must cooperate globally. No company can survive independently without going global."

Wei Shaojun believes that the development of China's semiconductor industry is not only a matter for China, but in fact it is the most important component of global semiconductor development. "The development of Chinese semiconductors is the development of global semiconductors. This development must be an open development and a development in cooperation with countries around the world. At present, this trend has begun to manifest, and it will become more and more obvious in the next few years."

China becomes an important part of the global value chain

Texas Instruments Cynthia Johnson pointed out that Texas Instruments generally looks for global partners in two cases. First, cooperation can increase the company's capabilities. When the company needs technology that is not available internally and feels that mergers and acquisitions are not necessary, it will cooperate with third-party partners. Second, to achieve rapid mass production. When own production is not cost-effective, we will look for external partners.

As early as 2010, Texas Instruments began to seek development in China. In 2010, Texas Instruments built a manufacturing base in Chengdu, and since then, it has added another test plant. "The reason for this is that 95% of our revenue comes from outside the United States, and a lot of the demand is actually in China. Regional diversification is very important to us, and China has a great opportunity for growth." Cynthia Johnson said.

She said that the global supply chain can bring many advantages to help the company achieve timely global supply. First of all, it is possible to reduce costs and expand the scale of production bases through large-scale production in different regions of the world. Secondly, diversified purchasing strategies can ensure continuous operation, reduce supply risks, optimize product use, and ensure production and delivery time. Finally, diversifying supplies can reduce the risks posed by resource and material shortages, and can quickly recover from a devastating disaster.

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