how chinese companies will become semiconductor … · how chinese companies become leaders in...
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INTERNATIONAL BUSINESS STRATEGIES, INC.
632 Industrial Way | Los Gatos CA 95030 | USA | 408 395 9585 | 408 395 5389 (fax)
www.ibs-inc.net | [email protected]
HOW CHINESE COMPANIES BECOME LEADERS IN SEMICONDUCTORS
MARCH 18 2015
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 2
INTERNATIONAL BUSINESS STRATEGIES BACKGROUND
Has been in business for over 25 years
Previous experience in managing 1.5K+ engineers at Rockwell International, which included
avionics, communications, and semiconductors. Strong emphasis on communications
Interface with most global leaders in electronics industry, with customers in U.S., Europe, South
Korea, Japan, Taiwan, China, India, etc
Interface and support for major global corporations such as Intel, Qualcomm, Broadcom, Microsoft,
Nokia, Samsung, Sony, Toshiba, Apple, Cisco, Huawei, IBM, Fujitsu, NEC, Hitachi, Renesas,
TSMC, STMicroelectronics, TI, ARM, Cadence, Synopsys, Mentor Graphics, and others
Participated with French Government on their advanced technology initiatives
Interface and support for financial institutions such as Goldman Sachs, Carlyle, Blackstone,
CitiGroup, Warburg Pincus, Walden, KKR, Morgan Stanley, Credit Suisse, BNP Paribas, Bain
Capital, Bank of America, TPG, and others
Involved with advanced technology concepts as well as price-sensitive platforms for smartphone
and other high volume platforms. Also involved with high performance infrastructure companies on
global basis
Strong expertise in China. Latest book is called China’s Globalization (How China Becomes
No. 1). Published business book entitled Chinamerica (McGraw Hill)
Forbes blog contributor, China Daily articles, Global Times editorials, etc
Involved in number of due diligence projects on number of IPOs
Support for strategic initiatives for number of global technology leaders
IBS HAS HIGH MARKET SHARE ON TECHNOLOGY AND STRATEGY BUSINESS
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 3
GLOBAL ELECTRONICS INDUSTRY PRODUCTION
CHINA IS STRENGTHENING RAPIDLY
$1.2T$1.3T
$1.4T$1.4T
$1.5T$1.6T
$1.6T
$1.7T
$1.8T
$1.9T
$2.1T
56.9% 58.5% 60.1% 61.6% 62.9% 64.5% 65.8% 67.1% 68.3% 69.7% 70.6%$0.0B
$0.6B
$1.2B
$1.8B
$2.4B
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Glo
bal E
lectr
onic
s I
ndustr
y P
roduction
China
Other
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 4
SEMICONDUCTOR MARKET BY PRODUCT
$0B
$150B
$300B
$450B
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Sem
iconducotr
Mark
et
MCU
DSP
Standard Cell ASIC
FPGA
Special-Purpose Logic
General-Purpose Logic
Display Driver
Analog
MOS Memory
MPU
Other Semiconductor
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 5
TOP-LEVEL ISSUES IN SEMICONDUCTOR
Market growth will be positive through 2020 but will likely have some volatility
MPU market is dominated by Intel
Windows 10 can strengthen competitive position of ARM 64-bit architecture
MCU vendor base is fragmented
Automotive has many growth areas
NXP-Freescale will be largest vendor
Modem market share leader is Qualcomm
Increased competitive pressure from MediaTek
Analog has many participants
TI is global leader
DRAM market share leader is Samsung
Others are SK Hynix and Micron Technology
NAND Flash market share leader is Samsung
Others are Toshiba, SanDisk, Micron Technology, and SK Hynix
MOST MARKET SEGMENTS ARE DOMINATED BY FOREIGN COMPANIES
ISSUE IS HOW TO CHANGE THIS IN CHINA MARKET
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 6
SUPPLY SEGMENTATION IN CHINA’S SEMICONDUCTOR MARKET
FOREIGN SUPPLY DOMINATES CHINA MARKET
4.5% 6.1% 7.2% 8.1% 8.6% 9.4% 10.2% 11.1% 12.1% 13.2% 14.1%
$128B $132B $136B
$147B
$166B
$181B
$198B
$216B
$233B
$254B
$278B
$0B
$100B
$200B
$300B
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Chin
ese S
em
iconducto
r C
onsum
ption
TOTAL SEMICONDUCTORCONSUMPTION IN
CHINA
Supply from Chinese
Semiconductor
Companies
Supply fromForeign
Semiconductor
Companies
2020 Goal of Chinese
Government
for Supply from Chinese
Semiconductor
Companies
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED.
$20B$26B
$32B$41B
$52B$63B
$73B
$84B$94B
$107B
$124B$108B $106B $104B
$107B
$114B
$119B
$125B
$132B
$139B
$147B
$154B
$128B $132B $136B
$147B
$166B
$181B
$198B
$216B
$233B
$254B
$278B
$0B
$100B
$200B
$300B
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Sem
iconducto
r C
onsum
ption in C
hin
a
Consumption by Chinese Companies
Consumption by Foreign Companies
SEMICONDUCTOR CONSUMPTION PATTERN IN CHINA
CHINESE EQUIPMENT COMPANIES ARE INCREASING CONSUMPTION OF SEMICONDUCTORS
MS-SEMIPRS3.1815 SLIDE 7
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 8
STRUCTURE OF CHINA’S ELECTRONICS INDUSTRY MARKET
In 2010, 90.2% of semiconductors consumed in China was for support of foreign electronics
equipment companies
In 2020, 69.8% will be for support of Chinese electronics equipment companies
Historical driver was equipment designed by foreign companies such as Apple, Hewlett-Packard,
Cisco Systems, Sony, and others
Foreign companies were technology leaders
Control of product features and architectures by foreign companies
New situation is where Chinese electronics equipment companies such as Huawei Technologies,
Lenovo Group, Xiaomi, and others are competitive in global markets
Semiconductors continue to be primarily supplied by foreign companies because of their
design expertise and IP
Exceptions are HiSilicon Technologies, Spreadtrum Communications, RDA Microelectronics,
Allwinner Technology, Fuzhou Rockchip Electronics, and Montage Technology
New China is where full supply chain for electronics needs to be in China, including wafers,
packaging and testing, IP creation, product design, and system design
Will need to be systematically implemented because competition is strong
MARKET FORCES AND TOP-LEVEL SUPPORT ARE NEEDED TO BUILD CHINA’S NEW
SEMICONDUCTOR INDUSTRY RAPIDLY
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 9
EXAMPLE OF SMARTPHONE MARKET
2B smartphones in 2020 with $100.00 in semiconductors per smartphone give $200B market
Chinese smartphone vendors are becoming competitive in China and global markets
It is significant that Micromax Informatics (Indian smartphone company) makes most of its
smartphones in China
There are opportunities for power amplifiers, transceivers, modems, application processors,
PMUs, image sensors, ISP, Wi-Fi, Bluetooth, NFC, etc, in smartphones
Important for Chinese semiconductor companies to select product area where there is
ability to compete in global markets as well as China market
Tablet computers have similar characteristics to smartphones, with increased volume by
Chinese companies
Prices, however are very low
Smart UHD televisions will have some similar building blocks as smartphones, including
wireless connectivity
DOCSIS 3.1 will become increasingly important in smart home environment
Smart cards with NFC will also have some common IP with smartphones
Security is high growth area
IMPORTANT TO DEVELOP PRODUCTS WHERE THERE IS HIGH MARKET LEVERAGE
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED.
19 60 148
346
504 644
741 825
913 1,005
1,094
305
440
581
624
636
639
673
711
759
796
829
324
500
729
970
1,140
1,283
1,413
1,536
1,671
1,802
1,923
0
700
1,400
2,100
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Num
ber
of
Sm
art
phones (
MU
)
Non-China
China
MS-SEMIPRS3.1815 SLIDE 10
SMARTPHONE AND TABLET COMPUTER MARKETS
SMARTPHONE MARKET TABLET COMPUTER MARKET
CHINESE COMPANIES HAVE HIGH GROWTH,
BUT STRONG PRICE PREMIUMS
29
77
131 142 153 164 176
188 202
218
8
42
85
145 135
139 142
146
150
154
159
8
71
162
276 277
292
306
322
338
357
377
0
100
200
300
400
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Num
ber
of
Table
ts (
MU
)
Non-China
China
IBS
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UHD TELEVISION MARKET
CHINESE COMPANIES WILL HAVE 50% OF MARKET IN 2017
1 8
27
49
65
89
111
2 10
21
30
36
42
44
47
2
11
29
57
84
107
133
158
0
45
90
135
180
2013 2014 2015 2016 2017 2018 2019 2020
Num
ber
of
UH
DTV
(M
U)
ChineseCompanies
OtherCompanies
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED.
DATA TRAFFIC IN MOBILE PLATFORM
VIDEO IS KEY DRIVER MS-SEMIPRS3.1815 SLIDE 12
3 6 11 19 3663
111
196
341
585
976
0
200
400
600
800
1,000
1,200
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Da
ta T
raff
ic (
EB
)
File Sharing
Gaming
M2M
Video
Other
Voice
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 13
IOT DEVICE MARKET
IOT IS ONE OF MARKETS THAT CAN GIVE HIGH GROWTH
$50.0B
$64.0B
$78.6B
$95.6B
$113.8B
$135.1B
$160.0B
$188.8B
$220.1B
$0B
$50B
$100B
$150B
$200B
$250B
2012 2013 2014 2015 2016 2017 2018 2019 2020
IoT
De
vic
es
Automotive
Consumer
Medical
Home
Logistics
Other
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 14
IOT SEMICONDUCTOR AND SENSOR MARKETS
SEMICONDUCTOR AND SENSORS HAVE HIGH GROWTH
$16.6B
$20.2B
$24.3B
$29.3B
$35.0B
$41.8B
$49.8B
$59.1B
$70.0B
$0B
$25B
$50B
$75B
2012 2013 2014 2015 2016 2017 2018 2019 2020
Se
mic
ond
ucto
r a
nd
Se
nso
rs W
ith
in C
lient
IoT
Analog
Processor
Connectivity
Memory
Semiconductor hardware
Sensors
Semiconductor software
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 15
IOT VALUE SEGMENTATION
MULTIPLE LEVELS OF VALUE AND VALUE LEVERAGE
Sensors (2%)
Devices (26%)
Services
(63% of Revenues)
Semiconductors (9%)
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 16
HOW TO WIN
If technology is developed in China, rate of progress will be too slow to compete
in global markets
Cannot close technology gap with leaders
Important to be low cost, which will require low overhead cost as well as low
product cost (small chip area is critical)
Design capabilities are very important
Best approach in gaining access to competitive products is through strategic
partnerships
Successful strategic relationships need to be based on two partners having
common long-term goals…cannot be short term
Important to have business structures that give equitable financial returns
Foreign companies must understand that better financial returns can be obtained
through partnership with Chinese company rather than through establishment of
sales team in China
CONCEPTS OF HOW TO WIN APPLY TO FOREIGN AND CHINESE COMPANIES
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED.
$2.1B
$2.5B$2.6B
$3.0B$3.1B
$3.4B
$3.6B
$3.9B
$4.2B
$4.6B
$5.0B
$0B
$2B
$4B
$6B
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
IP M
ark
et
Memory
Mixed-Signal
RF
Other
Processor
MS-SEMIPRS3.1815 SLIDE 17
IP MARKET BY PRODUCT
PROCESSOR IS LARGEST CATEGORY AND IS DOMINATED BY ARM
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED.
WHAT NOT TO DO
Have many companies in same market, and all have low market
share
Critical to be one of top two or three vendors
Be focused only on low cost
Important to have some form of technology advantage
Important to have access to financial resources required to develop
next-generation products
Sell to customers that have low market share
Many of these companies will not survive in longer term
Financial stability will be low
Have IP that is not clean
Will be major problem for products that will end up outside of China
CHINA IS MOVING TO ADVANCED TECHNOLOGY STAGE MS-SEMIPRS3.1815 SLIDE 18
IBS
© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED.
WINNING STRATEGIES: EIGHT GOLDEN RULES
1. Have exit strategy for company
Company that cannot be bought or cannot have IPO will have low value
2. Build strong management team
Having strong CEO is critical
Many companies fail because their management team is weak
3. Ensure access to adequate funding or funding roadmap
Need to develop products for multiple generations
New products must also be better than competitors
Cash management will be critical to long-term success
4. Have good visibility into customer targets
Critical to focus on getting design wins from growing customers
5. Have very strong product development organization
Need fast time-to-market for new products and ability to modify products rapidly
MS-SEMIPRS3.1815 SLIDE 19
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© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED.
WINNING STRATEGIES: EIGHT GOLDEN RULES (CONTINUED)
6. Participate in high growth markets where competitive advantage can be
built
Many market segments in China are growing
However, need to ensure that high market share can be built
Most profitable companies are those that are market share leaders
7. Have global perspective on competitors and customers
China market has good growth potential
However, need to ensure that foreign competitors do not take away market
8. Winning philosophy must be in place
Competition is brutal
Need team that is committed to win
Important to be sensitive to competitive threats as well as new opportunities
EXCELLENT GROWTH OPPORTUNITIES IN CHINA MARKET
MANY COMPANIES CAN BE SUCCESSFUL WITH APPROPRIATE STRATEGIES MS-SEMIPRS3.1815 SLIDE 20