US Sanctions Helped China Supercharge Its Chipmaking Industry

[xizhimen]

US Sanctions Helped China Supercharge Its Chipmaking Industry​

• Most of the world’s fastest-expanding chip firms are in China
• White House curbs on Huawei ignited demand for homemade chips

June 20 2022

BEIJING (BLOOMBERG) - China's chip industry is growing faster than anywhere else in the world, after US sanctions on local champions from Huawei Technologies to Hikvision spurred appetite for home-grown components.

Nineteen of the world's 20 fastest-growing chip industry firms over the past four quarters, on average, hail from the world's No. 2 economy, according to data compiled by Bloomberg. That compared with just 8 at the same point last year.

Those China-based suppliers of design software, processors and gear vital to chipmaking are expanding revenue at several times the likes of global leaders Taiwan Semiconductor Manufacturing Co (TSMC) or ASML Holding NV.


That supercharged growth underscores how tensions between Washington and Beijing are transforming the global US$550 billion (S$760 billion) semiconductor industry - a sector that plays an outsized role in everything from defence to the advent of future technologies like AI and autonomous cars.

In 2020, the US began restricting sales of American technology to companies like Semiconductor Manufacturing International and Hangzhou Hikvision Digital Technology, successfully containing their growth - but also fuelling a boom in Chinese chip-making and supply.

While shares in the likes of Cambricon Technologies have more than doubled from lows this year, analysts say there may still be room to grow. Beijing is expected to orchestrate billions of dollars of investment in the sector under ambitious programmes such as its "Little Giants" blueprint to endorse and bankroll national tech champions, and encourage "buy China" tactics to sidestep US sanctions.

The rise of indigenous names has caught the attention of some of the pickiest clients: Apple was said to consider Yangtze Memory Technologies as its latest supplier of iPhone flash memory.

"The biggest underlying trend is China's quest for self-sufficiency in the supply chain, catalysed by Covid-related lockdowns," Morningstar analyst Phelix Lee wrote in an email responding to inquiries from Bloomberg News.

"Amid lockdowns, Chinese customers who mostly use imported semiconductors need to source homegrown alternatives to ensure smooth operations".

At the heart of Beijing's ambitions is the impetus to wean itself off a geopolitical rival and more than US$430 billion worth of imported chipsets in 2021. Orders for chip-manufacturing equipment from overseas suppliers rose 58 per cent last year as local plants expanded capacity, data provided by industry body Semi show.

That in turn is driving local business. Total sales from Chinese-based chipmakers and designers jumped 18 per cent in 2021 to a record of more than 1 trillion yuan (S$207 billion), according to the China Semiconductor Industry Association.

A persistent chip shortage that's curtailing output at the world's largest makers of cars and consumer electronics is also working in local chipmakers' favour, helping Chinese suppliers more easily access the international market - sometimes with premiums tacked onto the best-selling products, such as auto and PC chips.

SMIC and Hua Hong Semiconductor, the biggest contract chip makers, have kept their Shanghai-based plants operating at almost full capacity even as the worst Covid-19 outbreak since 2020 paralyses factories and logistics across China.

With local authorities' help, cargo flights from Japan delivered essential materials and gear to chip plants as the city went under lockdown. SMIC recently reported a 67 per cent surge in quarterly sales, outpacing far larger rivals GlobalFoundries and TSMC.

Shanghai Fullhan Microelectronics's revenue grew 37 per cent on average because of high demand for surveillance products. The video chip designer has pledged to expand into electric vehicles and AI after winning its "Little Giant" designation. And design tool developer Primarius Technologies doubled sales on average over the past four quarters, saying it's developed software that can be used in making 3-nanometer chips.

Putting aside long-term profitability concerns, Morningstar's Mr Lee said the aggressive capacity build-up from Chinese players will elevate their presence globally. "There's little doubt Chinese chipmakers can achieve revenue growth over the next few years from cars, consumer electronics and other devices," he said.

Bloomberg - Are you a robot?

 

[xizhimen]

To achieve “technological self-reliance”, China IPO fundraising doubles US total to top global ranks

June. 20 2022

New listings in China this year have raked in more than double the amount raised on Wall Street, after officials camped out at Shanghai’s stock exchange during the city’s strict lockdown to ensure a steady flow of deals. Total fundraising from initial public offerings in China has hit almost $35bn this year, compared with just $16bn on Wall Street, according to data from Dealogic.

The strong showing for China’s IPO market came as authorities in Shanghai reacted swiftly after the city of 26mn entered a two-month lockdown, dispatching a squad of cadres to safeguard what is one of the most precious resources in China’s financial capital.

As residents flooded social media with complaints about life under house arrest, China’s securities regulator sent officials to camp out at Shanghai’s stock exchange for the duration — by day, grilling listings applicants via videoconference before signing off on share sales, and by night sleeping on cots and inflatable mattresses, according to people familiar with the matter. The Shanghai Stock Exchange did not immediately respond to a request for comment.

China’s equity fundraising haul, up 7 per cent from a year ago, puts the country at the top of global rankings and stands in stark contrast to the rest of the world, where IPO proceeds have fallen 80 per cent as the war in Ukraine, surging inflation and central bank rate rises have rattled markets and delayed companies’ plans to go public.

Bankers said the rush of Chinese listings was driven in part by Beijing’s desire to achieve “technological self-reliance”, with a special focus on sectors considered vital to economic growth and competition with the west including renewables, semiconductors and other high-end manufacturing.

One equity capital markets banker based in Shanghai said policymakers’ push for share offers by companies in “advanced technologies” had “prompted companies to pursue listings with higher valuations amid the market recovery, so they can raise more funds to expand production and grab more market share”.

That focus on strategic sectors has accelerated a shift in the domestic flow of Chinese IPOs. Only two dozen out of more than 130 new listings this year went to the main markets of the Shanghai and Shenzhen stock exchanges with almost 80 per cent of funds raised instead on Shanghai’s science and technology-focused Star Market and Shenzhen’s tech-driven ChiNext Market.

On the Star Market, launched in 2019 with the backing of President Xi Jinping, semiconductor-related companies have already raised more than $6.6bn in 2022. China’s largest IPO this year, JinkoSolar, brought in almost $1.6bn on Star in January. Yet the steady flow of listings would not have been possible had the city’s financial sector not worked double-time during the lockdown.

Financiers in Shanghai said investment banks stationed staff at the offices of clients for months at a time this year so they would not be trapped in quarantine and prevented from conducting on-site due diligence. Such efforts ensured a furious pace of dealmaking despite the restrictions, with China averaging more than one IPO per trading day during lockdown. In total, investment banks priced 47 offerings and raised more than $8.7bn from the start of April to the end of May.

Because IPO regulations in China lock in the date of a stock’s trading debut well in advance, some companies that received approval to go public just before or during lockdown had little choice but to forge ahead despite a sell-off that at one point pushed the benchmark CSI 300 index as much as 24 per cent lower for the year. “If some of these companies were already at the last stage [of the IPO process] the lockdown doesn’t really affect their listing plans,” said Dickie Wong, head of research at Kingston Securities in Hong Kong.

The rise in domestic share sales this year also followed a regulatory crackdown on the country’s tech and internet sector launched by Beijing almost 12 months ago, which has disrupted a pipeline of deals previously slated for New York or Hong Kong. Investment banks are waiting for officials to finalise foreign listings rules for groups with large amounts of user data, resulting in about 95 per cent of IPO fundraising by Chinese companies this year being carried out domestically.


“There is a trend among pre-IPO private companies that previously were quite definitively seeking to get listed offshore in Hong Kong or the US — some of them are now looking more seriously at mainland listings”, said an IPO lawyer at one international firm based in Shanghai. Heading into the third quarter, bankers said improving sentiment would encourage larger listings, which require more personnel to pull off.

Valuations for Chinese equities have rebounded in recent weeks as lockdown restrictions have eased, with the CSI 300 up more than 14 per cent from its low in late April. “With big IPOs, you have to delay since you need to get the paperwork filed and do the groundwork first,” said a banker at one medium-sized brokerage.

China IPO fundraising doubles US total to top global ranks

Government officials camped out at Shanghai bourse to ensure steady flow of listings during lockdown

www.ft.com

 

[xizhimen]

China winning in down-market chips​

Park Sung-hoon

June 20, 2022

Korea has incurred a deficit in trade with China for the first time since August 1994. According to the Korea Customs Service, exports to China in May totaled $13.4 billion, while imports reached $14.9 billion to cause a deficit of $1.1 billion. The red has already stretched to $600 million in the first 10-day trade this month. For the first time since the normalization of relations between the two countries, the surplus end has changed.

Korea International Trade Association (KITA) Beijing branch has embarked on an examination of the alarming turnaround. Of Korea imports from China, 16.5 percent were semiconductors, 10.3 percent precision chemicals and 5.5 percent computers. Chip imports from China in May totaled $2.4 billion, up 40.9 percent on year. Chips were also Korea’s top export to China, but Korea’s chip imports from China have grown four times faster, contributing to the deficit. What has caused such change?

China has been going all-out to localize chipmaking technology amid U.S. containment. It has been as eager with semiconductors as with its nuclear, thermonuclear weapons and satellite developments in the late 1960s. While announcing the “Made in China 2025” roadmap in 2015, Beijing prioritized next-generation IT and semiconductor technology among its 10 strategic industries and created a national chip fund.

According to the China Semiconductor Industry Association (CSIA), the Chinese government provided 138.7 billion yuan ($20.8 billion) to its top 50 chipmakers and designers through 2019. In a five-year plan announced in 2020, Beijing pledged chip funding of 204.1 billion yuan. China’s State Council — the country’s top executive body — vowed 1 trillion yuan in chip funding through 2025.

The chip industry has rapidly changed as a result. First, China’s chip design, or fabless technology, has been advancing fast. According to Taiwanese market researcher TransForce’s ranking for the first quarter, published on June 9, China’s Will Semi ranked No. 9 in the global chip design market nearly on par with such majors as Qualcomm, NVIDIA, Broadcom and AMD for the first time. Will Semi specializes in designing complementary metal-oxide semiconductors (CMOS) for image sensors.

The fabless industry is ascending rapidly in China due to strong demand. There are over 1,600 chip design houses in China. They design not just chips of 14-or-under nanometer class CPUs for computers or application processors for mobile phones but also various types of chips for other functions. They focus on mass-market chip designs to meet the demand for a diverse range of chips.

Second, Chinese players are seeking economies of scale in budget chips. Samsung Electronics and Taiwan’s TSMC are vying in next-gen chips of the 3-nanometer class. But China’s top foundry player SMIC has only one 14-nanometer class fabless plant in Shanghai. Their mainstay is in chips of 28-or-over nanometer class. They cannot migrate to chips of higher performance due to the U.S. ban on ASML exporting to China its extreme ultraviolet radiation (EUV) equipment — essential to inscribing tiny circuits on chips — beyond the 7-nanometer class.

SMIC had to turn to more mass-market chips that do not require sophisticate foreign equipment, which helped bolster its financial performance. China produced 359.4 billion chips last year, jumping 33.3 percent on year. According to the Semiconductor Equipment and Materials International (SEMI), China was the biggest buyer of semiconductor production equipment for two straight years. Last year, it imported $29.6 billion worth, although they were not in the most advanced form. The Bloomberg observed that the surge in China’s chip production capacity will translate into greater global reliance on Chinese supply.

Ko Young-hwa, a researcher at the Center for Korean Peninsula Studies at Peking University, pointed out that since there were over 70,000 chip-related companies in China, Korea will be buying more chips from China than selling. “It is the typical result of China’s human wave attack,” said Ko. Korea must study the status quo of Chinese companies, as it lacks understanding of the Chinese chip power.

Third, China is deemed highly competitive in machine deep-learning AI chips necessary for biometric and voice applications as a result of the Chinese technology development.

Amid the Covid-19 pandemic, China has enhanced facial recognition function of CCTVs and thermal cameras. It also has advanced the sensor technology to detect obstacles for self-driving vehicles. Since it cannot catch up with Intel or Qualcomm in CPU design or Samsung Electronics in memory chipmaking, China targeted a niche market for the future.

According to Lee Woo-keun, a professor of nano and micro mechanics at Tsinghua University, China can hit a jackpot in sensors and AI chips thanks to its enormous investment in the sector. “Korea must pay heed to the development in the semiconductor front in China as local universities have been investing heavily to groom talents, which could be China’s future advantage,” he stressed.

China winning in down-market chips

Korea has incurred a deficit in trade with China for the first time since August 1994.

koreajoongangdaily.joins.com

 

[Viva_vietnamm]

Last time I checked, China is still the most populous nation on this planet.

Yeah, but US santion will not kill CN in just few years. Soviet collapsed after about 50 years of US's sanction... and CN just suffer US's santion 4 years.

Btw, at least many Chinese feel so hopeless under US's santion now, no job, not enough money to buy house and raise kids, to the only thing they can do is just "lying flat"


-----------

What is ‘lying flat’, and why are Chinese officials standing up to it?​

• China’s Gen Z and its youngest millennials are finding solace in lying flat amid a collective swell in antipathy toward working themselves to the bone
• Lying flat, or tang ping in Chinese, means doing the bare minimum to get by, and the ethos poses a threat to President Xi Jinping’s ‘Chinese dream’

What is ‘lying flat’, and why are Chinese officials standing up to it?

Lying flat, or tang ping in Chinese, means doing the bare minimum to get by, and striving for nothing more than what is absolutely essential for survival, but this ethos poses a threat to President Xi Jinping’s “Chinese dream”.

www.scmp.com

 

[xizhimen]

Yeah, but US santion will not kill CN in just few years. Soviet collapsed after about 50 years of US's sanction... and CN just suffer US's santion 4 years.

Ha , we are waiting, they hurt us with record import every passing month, now they can not take the high inflation and is about to lift those tariffs hurting no one but themselves.

Biden is considering lifting Trump-era tariffs to slow inflation. Here's how that may affect you | CNN Politics

Lifting Trump-era tariffs is one of the few things President Joe Biden could do to slow inflation -- but many Americans still wouldn't feel a big relief from rising prices if he took that action. The imports affected by the tariffs aren't a huge part of the US economy.

edition.cnn.com

 

[xizhimen]

At least CN can not expand anymore under US's santion. Hundred Chinese feel so hopeless under US's santion now, no job, not enough money to buy house and raise kids

In which region that China can't expand her trade? Korea just registered first trade deficit with China during the whole history, China imported less due to covid in the last a couple of months and exports hit record high with almost every single trading partner.

 

[Viva_vietnamm]

In which region that China can't expand her trade? Korea just registered first trade deficit with China during the whole history, China imported less due to covid in the last a couple of months and exports hit record high with almost every single trading partner.

Just look at China's birth rate drops to record low in 2021, people will realize that CN now is shrinking like N.Korea . Expand here mean expand in power, expand in trade only help rich CNese become richer while poor CNese still remain poor and can't afford to buy house and raise kids .

---------------------------

"What we need are substantial subsidies, not encouragement. It's not because people don't like children — it's because they can't afford to. From birth to the time they start working, the healthcare, housing, education, and other costs are all problems young people can't solve," Zhangfang wrote.

"If we can't even take care of ourselves, what makes the government think we can take care of not only one, but three, children?" he added.

China's pivot to a 3-child policy won't make a dent in its declining birth rate because the country's young couples don't want kids

The country launched a new three-child policy to address its declining birth rate, but couples remain resistant to the idea of having more children.

www.insider.com

 

[xizhimen]

Just look at China's birth rate drops to record low in 2021, people will realize that CN now is shrinking like N.Korea . Expand here mean expand in power, expand in trade only help rich CNese become richer while poor CNese still remain poor and can't afford to buy house and raise kids .

---------------------------

"What we need are substantial subsidies, not encouragement. It's not because people don't like children — it's because they can't afford to. From birth to the time they start working, the healthcare, housing, education, and other costs are all problems young people can't solve," Zhangfang wrote.

"If we can't even take care of ourselves, what makes the government think we can take care of not only one, but three, children?" he added.

China's pivot to a 3-child policy won't make a dent in its declining birth rate because the country's young couples don't want kids

The country launched a new three-child policy to address its declining birth rate, but couples remain resistant to the idea of having more children.

www.insider.com

If 1.4 billion Chinese have to go, they will go long after Europeans, Japanese and Koreans

The 20 countries with the lowest fertility rates in 2021

Countries with the lowest fertility rates 2023 | Statista

The statistic shows the 20 countries with the lowest fertility rates in 2023.

www.statista.com

 

[xizhimen]

No surprise when N.Korea and mainland CN is not on the list. Cos CN's fertility rates is just like N.Korea when under US's sanction

Hopefully one day you can get there too, developed countries tend to have less children than underdeveloped countries, common sense.

 

[xizhimen]

China’s chip industry growing faster than anywhere in the world, It looks like Trump’s tech war made things worse.​

by NICK FARRELL
on22 JUNE 2022

It looks like Trump’s tech war made things worse.
China's chip industry is growing faster than anywhere else in the world, after US sanctions on local champions from Huawei to Hikvision spurred appetite for home-grown components.

Nineteen of the world's 20 fastest-growing chip industry firms over the past four quarters, on average, hail from the world's No. 2 economy, according to data compiled by Bloomberg. That compared with eight at the same point last year.

Those China-based suppliers of design software, processors and gear vital to chipmaking are expanding revenue at several times the likes of global leaders TSMC or ASML.

That supercharged growth underscores how tensions between Washington and Beijing are transforming the global $550 billion semiconductor industry -- a sector that plays an outsized role in everything from defense to the advent of future technologies like AI and autonomous cars.

In 2020, the US, under President Donald Trump, began restricting sales of American technology to companies like Semiconductor Manufacturing International and Hangzhou Hikvision Digital Technology, successfully containing their growth. However the move seems to have backfired by fueling a boom in Chinese chip-making and supply.

China’s chip industry growing faster than anywhere in the world

It looks like Trump’s tech war made things worse China's chip industry is growing faster than anywhere else in the world, after US sanctions on local champions from Huawei to Hikvision spurred appetite for home-grown components. Nineteen of the world's 20 fastest-growing chip industry firms...

www.fudzilla.com