Funds become a barrier to the development of IC companies in China

Reviewing China's IC industry development plan for the Eleventh Five-Year Plan, the main economic indicators are: “Through 2010, China’s IC industry output will reach 80 billion pieces, and sales revenue will reach about RMB 300 billion, with an average annual growth rate of 30%, accounting for approximately 10% of the world's integrated circuit market share meets 30% of the domestic market demand.” From the Twelfth Five-Year Plan, the size of the IC industry has been doubled. However, IC companies in China are currently facing the problem of shortage of funds, the need for funds for technological upgrading, and the production of new product lines. Therefore, government policies and their own efforts are needed to gradually overcome the difficulties.

The integrated circuit industry is like a "golden animal." According to the statistics, the ratio of global semiconductor investment to its annual sales, from nearly 20% before, has dropped to 15% this year, indicating that the annual investment in the semiconductor industry is approximately US$45 billion. With reference to the industry's empirical data, for a 12-inch production line with an advanced manufacturing process, it usually invests 100 million U.S. dollars and can generate sales of 50 million U.S. dollars, or 2:1. Obviously, according to different types of industries, such as IDM and OEM, the input and output ratios are not the same in the United States and other regions. Therefore, 2:1 is only a valuation and needs to be corrected according to actual conditions. However, it is no doubt that in fact it is necessary to increase investment in order to increase output.

The 12th Five-Year Plan for China's IC industry will increase from 144 billion yuan to a target value of 330 billion yuan, of which an added value will reach 186 billion yuan. If we also accept an input-output ratio of 2:1, then China needs a corresponding investment of 372 billion yuan, which is astronomical. Having seen the development plan explained by the late President Jiang Shangzhou, he estimated that in the 12th Five-Year Plan, the IC industry needs various investments of up to 270 billion yuan.

Associating with the planning of Wang Ningguo before SMIC, his first step was to achieve an annual sales increase from about 1.5 billion U.S. dollars to 3 billion U.S. dollars, and then SMIC’s ultimate goal in the 12th Five-Year Plan to reach 5 billion U.S. dollars. The corresponding annual investment needs more than 1.5 billion U.S. dollars.

Therefore, the current solution to funding sources is the top priority for China's 12-inch production line. Jiang Shangzhou once stated that SMIC would adopt “introducing strategic funds” to ensure that investors have a 15% bonus each year. However, the changes in the company’s management led to the cessation of the plan, so the future funding of the package may hinder the realization of the 12th Five-Year Plan.

In the future, China's integrated circuit industry may present two different perspectives. One is that under the financial support of the government and other parties, through the efforts of the company, the gap between the world's level and the world's level may be narrowed, and there is a certain right to speak in the world. The gap between the other one and the advanced level continues to expand, there are IC companies, but not necessarily world-scale industries.