Market News(May 16)
China’s IC output records its first monthly growth in 16 months
According to South China Morning Post, China’s IC output in April recorded its first monthly growth in 16 months. Production data for ICs, covering companies with an annual turnover above 20 million yuan (US$2.9 million), shows 3.8% year-on-year growth to 28.1 billion units in April. In addition, the “output value” of such companies was up 5.6% year-on-year in April, marking the biggest monthly growth since last October.
The increase in output occurred when the Chinese mainland’s chip imports dropped drastically, reflected in the overall IC import data. In the first four months of the year, China’s total IC imports shrank 21% year-on-year to 146.8 billion units, according to data released last week by the General Administration of Customs. The report suggests China has moved to producing more legacy chips to meet demand from automakers and home appliance makers.
China intensified its semiconductor self-sufficiency drive to boost the domestic output of microchips and reduce its reliance on overseas products. Industrial data shows the government subsidized 190 listed Chinese semiconductor companies with more than 12.1 billion yuan in 2022.
China’s chip output recorded its first growth in 16 months, pointing to a recovery in chip demand in the Chinese market, which is shaking off the shadow of COVID-19 and maintaining strong demand for chips, particularly in the automotive industry. It also indicates the supply chain reorganization in China’s chip manufacturing has started to take effect by reducing demand for and reliance on overseas products. At the same time, China-made chips are expanding, meaning the localization pace is accelerating for chip design, production, and manufacturing.
Market News(May 16)
China-made server chips yield twofold growth
The size of China’s server market was US$27.34 billion in 2022, up 9.1% year-on-year, according to the 2022 China Server Market Tracking Report released by the Internet Data Center of China (IDC). China’s server market accounts for 24.5% of the overall server market worldwide.
X86 remains the mainstream server chip globally based on compatibility and stability considerations. China, mainly considering information security issues, has been actively developing non-X86 server chips. It is therefore pushing the development of China-made server chips, with various kinds based on ARM developed. AMD licensed the X86 architecture to Hygon to seize the server chip market. DEC’s closing down led to the patent expiration of the alpha architecture adopted by Sunway so that the latter could develop the alpha architecture with more and more independence.
The emerging trend of China-made server chips is inseparably associated with the rise of China-made server OS. Nowadays, Windows only accounts for over 20% of China’s server market share. Huawei’s Euler OS, Alibaba’s Anolis OS and Apsara Cloud, and the like have gradually occupied certain market shares. The combination of China-made OS and server chips can better meet the country’s domestic demand.
As mobile phone and PC chips domestically produced in China advance, they, combined with server chips, will gradually form a complete ecology of China-made chips, helping break the monopoly of American chips. However, China’s chip production localization is still struggling, striving for a 0-to-1 breakthrough. On the one hand, ARM is not an easy path to go in the face of the technical barriers and mature ecology of Intel’s X86 architecture. On the other, developing server chips based on the ARM architecture is fraught with difficulties due to the design complexity and extremely high performance and power consumption requirements. It will be a long-term battle requiring heavy investment, without a doubt. It is also necessary to consider the intangible challenge of the market and after-sale links in advance.
Enterprise News(May 17)
Crossover towards Chipmaking: OPPO shuts down its chip design subsidiary Zeku
OPPO entered the advanced process field by adopting the 6nm process for MariSilicon X, a self-developed imaging NPU launched at the end of 2021. At the end of 2022, Zeku released its first self-developed SoC MariSilicon Y, a Bluetooth SoC. Industrial news reported this January that OPPO’s self-developed smartphone application processor (AP) would tape out in Q2 2023 and start mass production in Q3. According to OPPO, in the face of the uncertain global economy and smartphone market, the company decided to close Zeku after serious consideration.
Global smartphone shipments plunged to a low point not seen since 2014. Canalys estimated there were 1.19 billion smartphones shipped in 2022, among which OPPO shipped 113 million units, down 22% year-on-year, compared to the 1.37 billion and 120 million in 2019, when Zeku was founded.
Struggling to sustain the huge expenses of chipmaking with sales, smartphone makers reduced the price-performance ratio because more advanced chip processes mean higher design costs. Zeku’s first self-developed chip adopted the 6nm process, while its self-developed AP targeted more advanced processes, leading to higher costs and tape-out expenses. Furthermore, since the chip industry is a typical high-paying industry, and Zeku has more than 2,000 employees, it requires corresponding investment to build and expand a team of talents.
Crossover to chipmaking is not new. Companies in different sectors face different chipmaking situations. Internet companies can undertake a significant number of scenarios. Chips can be of use wherever there is a demand for computing power. In contrast, terminal vendors, such as smartphone makers, produce chips primarily for self-use, aiming at differentiated customization based on brand positioning. They hence rely on sales revenues to cover chipmaking expenses. Winning this drawn-out tug of war requires both stable investments before tape-out and a virtuous circle after tape-out, boosted by mutual promotion between chip and product performance. In addition, chip design should be highly coupled with product positioning.
On the positive side, Zeku’s shutdown can serve as an attempt for terminal vendors to explore the boundary of vertical development and supply and demand. It is reasonable to press the stop button in time based on feedback.
Market News(May 18)
The SiC wafer market is expected to grow 22% in 2023
Research firm TECHCET recently released an up-to-date report on SiC wafer materials. According to its estimation, despite the overall slowdown in the global economy and other semiconductor material markets this year, the SiC wafer market will continue to grow strongly to reach 1.072 million units, marking an annual increase of about 22%. Compared to 2021, the N-type SiC wafer market expanded about 15% in 2022, totaling 8.84 billion wafers. An overall CAGR of approximately 17% is estimated from 2022 to 2027.
According to TECHCET, the continual rise of the SiC wafer market demand mainly results from silicon-based power devices approaching their physical limits, particularly for high-speed or high-power applications. SiC is at the forefront in terms of both materials properties and supply chain maturity. Demand from electric vehicles, charging infrastructure, green energy production, and more efficient power devices are all driving the SiC market to expand. ICwise director said that SiC MOSFETs would replace in-vehicle IGBTs in the future. Research firm Yole estimated earlier that by 2025, the SiC market in new energy vehicles and charging piles would reach US$1.778 billion, accounting for about 70% of the total SiC market.
Currently, vertically integrated SiC device companies, such as Wolfspeed, ON Semiconductor, and ST Microelectronics, are strengthening their SiC wafer production capacity. These companies can achieve that internally, while others seek foundry services to compensate for the gap, including X-trinsic and Halo Industries. In addition, cooperation in SiC between companies is growing more frequent.
Silicon carbide (SiC) is widely used in current wide-bandgap semiconductors thanks to its stable chemical properties, high thermal conductivity, low coefficient of thermal expansion, good wear resistance, and high hardness. As the hottest market nowadays, new energy vehicle is the best field for SiC to play on. Although SiC is gaining popularity, its chemical properties make it challenging to process ingots into wafers, causing insufficient production of SiC wafers and resulting in the SiC wafer market always being in short supply. Major SiC manufacturers have increased the ingot supply and expanded production in the past few years. However, few have really entered the wafer service market, and prices have remained high. The division of labor among all parties in the vertical SiC industry chain is still in continuous adjustment.
Some Chinese Industrial News
1.RAID controller chip achieves domestic substitution
Nationalchip announced on May 16 the recent internal testing success of CCRD3316, the improved mass-production version of the first-generation RAID controller chip, and its adapter card, both developed by Guangzhou Lingxin Technology, a wholly-owned subsidiary of Suzhou Nationalchip Technology.
Foreign companies have long monopolized raid control chips. With the chip’s successful development and internal testing, it is possible to achieve domestic substitution of such products, particularly in AI servers, storage servers, and Xinchuang (Information Technology Application Innovation Industry) storage devices. China-made RAID cards and chips have broad market prospects. Guangzhou Lingxin, Nationalchip’s wholly-owned subsidiary, has completely independent intellectual property rights for the above-mentioned mass-production version of the chip products. With its successful development and internal testing, Nationalchip has acquired the competitive ability of RAID controller chip and RAID card products, which are ready for mass production shipment and expected to positively impact the market expansion and performance growth of the company’s future business.
2.Synopsys, TSMC, and Ansys advance multi-die systems together
Synopsys announced to strengthen collaboration with TSMC and Ansys in multi-die system design and manufacturing, contributing to accelerating the integration of heterogeneous dies to achieve the next level of system scalability and functionality. Benefited from the cooperation with TSMC in the latter’s 3DFabric™ technologies and 3Dblox™ standard, Synopsys can provide industry-leading comprehensive EDA and IP solutions to multi-die systems on TSMC’s advanced 7nm, 5nm, and 3nm process technologies. Integrated with Synopsys implementation and signoff solutions and Ansys multi-physics analysis technology, TSMC’s advanced process technologies help developers address serious challenges of multi-die systems, from early exploration to signoff power, signal, and thermal integrity analysis in architecture design.
Unlike monolithic system-on-chips (SoCs), multi-die systems are highly interdependent and, thus, must be developed with a system-level perspective. Synopsys multi-die system solutions can achieve early architecture exploration, rapid software development and system validation, efficient die and package co-design, robust and secure die-to-die connectivity, and enhanced manufacturing and reliability.
3.Hua Hong Semiconductor listed on the Sci-Tech Innovation Board
Shanghai Stock Exchange announced on May 17 the IPO approval of Hua Hong Semiconductor (Huahong Grace) on the Sci-Tech Innovation Board (STIB). To head toward this STIB listing, Hua Hong Semiconductor aims to raise 18 billion yuan, among which 12.5 billion yuan to be invested in the Hua Hong Manufacturing (Wuxi) project, 2 billion yuan in the 8-inch factory optimization and upgrading project, 2.5 billion yuan in the R&D+I (research, development, and innovation) project for special process technologies, and 1 billion yuan to supplement working capital, making it the biggest IPO of the year.
Regarding this IPO, a responsible person of Hua Hong Semiconductor said that the wafer foundry industry was capital-intensive, and the company was currently facing market opportunities brought by upgrading downstream technology industries, such as new energy vehicles, the Internet of Things, and smart manufacturing. With the occasion of its STIB listing, the company expects to invest heavily in process R&D, the introduction of talents, and production capacity enhancement to further improve its market share, profitability, and sustainable development in the competitive market.