Allen Lu, Ph.D., SEMI China President

April 23, 2015, Invest Penang

Overview of China Semiconductor Industry

Agenda

• Global and China Semiconductor Market

• Challenges and Opportunities of China

Semiconductor Industry

• Recent Government IC Initiatives

Americas

27%

Taiwan

12%

China

12%

Europe

14%

India

1%

Japan

23%

Korea

9%

Singapore

2%

CHINA 320

Companies

EUROPE 255

Companies

INDIA 25

Companies

JAPAN 414

Companies

KOREA 203

Companies AMERICAS 476

Companies

SINGAPORE 33 Companies

TAIWAN 215

Companies

About 2000 members globally SEMI member HQ region

Total Members by Size

Under $5 M

67%$1B - $2B

1%

$500M - $1B

1%

$100M - $500M

3%

Over $2.5B

>1%

$25M - $100M

6%

$5M - $25M

22%

SEMI: global & professional

Semiconductor Industry Association

16%

Global and China

Semiconductor Market

Semiconductor Industry:

Powered by the Applications

PC

Mobile Computing,

Internet of Things

Mobile

Phone

Equipment

Materials

Semiconductors

Electronic End Equipment

Semiconductor /Electronic Industry

Supply-Chain

Source: WSTS/SIA, SEMI, and IC Insights

2013

Forecast2014

$32B $38B

$1,488B $1,412B

$306B $325B

$45B $47B

7

2.5%

3.7%

2.3%

1.5%

2.0%

4.1% 4.1%

3.6%

4.7%

3.4%

2.6%

4.6%

3.3%

1.7%

2.5%

3.7%

4.6%

2.1%

-1.9%

4.3%

2.8% 2.7%

4%

8% 10%

29%

32%

42%

-9%

4%

-8%

19%

37%

-32%

1%

18%

28%

7%

9%

4%

-5%

-10%

34%

2%

-3%

4%7%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

-2%

-1%

0%

1%

2%

3%

4%

5%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14F

Sem

i In

du

stry

Ch

ang

e

Wo

rld

wid

e G

DP

Ch

ang

e

Year

1990-2014F Semiconductor Industry Growth versus Worldwide GDP Growth

Global GDP Growth WW Semi Industry Growth

Source: IC Insights

= Global Recession

Threshold

3.2%

4.0%3.9%

3.4%

Global semiconductor market closely

correlated to GDP

Capacity Increase Slowing Down

Recent Equipment Spending Driven by Upgrading

SEMI World Fab Forecast: Since downturn the industry

spends more money on upgrading existing facilities

Average change rates 2003 – 2007 2011-2015*

Fab Equipment 18% 5%

Fab Capacity 17% 3%

* 2011-2015: excluding 2010 because fab equipment growth was unusual high

Micron Feb 2014: Industry bit supply growth slowing:

DRAM: 49% in 2010 to 24% in 2015

NAND: 74% in 2010 to 45% in 2015

Global Frontend Equipment Spending

Source: SEMI World Fab Forecast, August 2014

TSMC Dominates Foundry Fab Investment

Europe

6%Japan

10%

North

America19%

Korea

18%

Taiwan

30%

China

13%

SEA

4%

Global Semiconductor Equipment Market

(Including A&T Equipment)

Totals may not add due to rounding

2014F = $38.4 Billion

2014F 2015F %

$B $B Change

Europe 2.49 3.68 48%

China 4.98 5.06 2%

North America 7.15 7.33 3%

South Korea 6.94 7.98 15%

SEA 1.66 2.05 23%

Japan 3.65 4.22 16%

Taiwan 11.57 12.27 6%

Total Regions 38.44 42.59 11%

Region

Source: SEMI

Europe

7%

Japan

17%

North

America11%

Korea

16%

Taiwan

21%

China

13%

SEA

15%

Totals may not add due to rounding

2014F = $44.7 Billion

2014F 2015F %

$B $B Change

Europe 3.13 3.24 4%

China 5.77 6.09 6%

N orth America 4.93 5.11 4%

South Korea 7.17 7.64 7%

SEA 6.77 7.12 5%

Japan 7.40 7.47 1%

T aiwan 9.58 10.02 5%

T otal Regions 44.75 46.69 4%

Region

Source: SEMI Materials Market Data Subscription August 2014

Global Semiconductor Material Market

(Including A&T Material)

China Semiconductor Industry:

Challenges and Opportunities Coexist

2014 Leading Imports to China

15

Source: China’s Customs

0 500 1000 1500 2000 2500

液晶面

板

铁矿石

原油

集成电

路芯片

496

1057

2197

2313

Unit：$100M USD

China’s Electronic Products Manufacturing

Drives Huge IC Consumption

Source –CVIA, Ministry of Information Industry of China, SEMI, May 2014

Example of China’s Electronic Product Output in 2013

Output

(Million

units)

Growth

Rate

% of World

Output

Export

(Million

units)

Cell

Phone 1456 23.2% 81.1% 1190

LCD TV 122.9 7.2% 56.9% 54.6

Notebook

& Tablet 273 7.9% 70% 326.7

Digital

Camera 46.8 -33.1% 74.5% 41

China Semiconductor Industry

Continuous to Grow

Source: CSIA, SEMI, SICA

1.5 2.3 3.0 3.4 4.0 5.4 8.1 9.8

13.0

2.2 2.8 3.9

5.2 5.7 5.0

6.6

6.7

7.9

9.7

3.0 3.4

4.2

6.4

8.3 8.9

7.3

9.3

15.1

16.4

17.7

2.4 3.3 4.3

6.7 8.6

12.6

16.4 17.9 16.2

21.3

29.9

34.2

40.5

0

5

10

15

20

25

30

35

40

45

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

IC P&T (USD Billion)

IC Manufacture (USD Billion)

IC Design (USD Billion)

IC Industry (Design+Manufacture+P&T)

China IC Industry Revenue

Expanding 300mm Capacity in China

Source: SEMI China, Oct. 2014

Company Location Tech-node

(nm)

Capacity

(K/month) Products Status

Huali Shanghai 55 25 Foundry Will add capacity to 35K/M

SK Hynix Wuxi 29 130 DRAM Production & Upgrade

Intel Dalian 65 15 Chipset Production

Samsung Xi’an 20 40 NAND

Flash

Total plan for Xi’an 1st phase:

100K/month

SMIC Beijing 40 36 Foundry Production

SMIC Beijing 40-20 (Planned)

- Foundry Construction. 5K－6K/M in end of

2014

SMIC Shanghai 40 14 Foundry Production and

expand to 14K/M in 2014

WXIC Wuhan 45 9 NOR Flash,

Foundry Production

Key Local Semiconductor

Equipment Suppliers

Equipment Company

Exposure & Write Equipment SMEE

Photoresist Processing Equipment Kingsemi

Etch Equipment AMEC, NMC

Surface Conditioning Equipment Sevenstar, Kingsemi, ACM

Thermal Process Equipment Sevenstar

Ion Implant Equipment ZKX

Thin Film Deposition Equipment (CVD/

Sputter/Electroplating/electro deposition) NMC, Piotech

Inspection & Measurement Equipment Grand，Raintree

CMP Equipment Tianjin Hwatsing

Key Local Semiconductor

Material Suppliers

Material Company

Wafer Gritek, JRH, Simgui, Waferworks

Lithography related materials (photoresist, developer, etc.) Kempur, Ruihong

Sputtering Targets KFMI, Grikin

CMP Slurry Anji

Plating solution Sinyang

Chemicals Runma, Jingrui, Huayi

Special Gas Huategas, Jinhong, Creditchem

Through government policy, special project funding, and efforts of

the industry, China’s equipment & material companies covered all

major process sectors

Global Semiconductor Industry Highly Consolidated

2013

Rank Company HQ

2013 Revenue

(in US Million)

2013

Rank Company HQ

2013 Revenue

(in US Million)

1 Intel U.S. 48,321 11 Renesas Japan 7,975

2 Samsung Korea 34,378 12 AMD** U.S. 5,299

3 TSMC* Taiwan 19,850 13 Infineon Europe 4,862

4 Qualcomm** U.S. 17,211 14 Sony Japan 4,869

5 Micron U.S. 14,360 15 NXP Europe 4,815

6 SK Hynix Korea 12,970 16 MediaTek** Taiwan 4,587

7 Toshiba Japan 11,958 17 GlobalFoundries* U.S. 4,261

8 TI U.S. 11,474 18 Freescale U.S. 4,007

9 Broadcom** U.S. 8,219 19 UMC*

Taiwan 3,959

10 ST Europe 8,014 20 Nvidia** U.S. 3,898

Source: IC Insights, 2014

Top 20 Semiconductor Companies by 2013 Revenue

* Foundry **Fabless

Global Semiconductor Industry Highly Consolidated

2013

Rank Company HQ

2013 Revenue

(in US Million)

2013

Rank Company HQ

2013 Revenue

(in US Million)

1 Intel U.S. 48,321 11 Renesas Japan 7,975

2 Samsung Korea 34,378 12 AMD** U.S. 5,299

3 TSMC* Taiwan 19,850 13 Infineon Europe 4,862

4 Qualcomm** U.S. 17,211 14 Sony Japan 4,869

5 Micron U.S. 14,360 15 NXP Europe 4,815

6 SK Hynix Korea 12,970 16 MediaTek** Taiwan 4,587

7 Toshiba Japan 11,958 17 GlobalFoundries* U.S. 4,261

8 TI U.S. 11,474 18 Freescale U.S. 4,007

9 Broadcom** U.S. 8,219 19 UMC*

Taiwan 3,959

10 ST Europe 8,014 20 Nvidia** U.S. 3,898

Source: IC Insights, 2014

Top 20 Semiconductor Companies by 2013 Revenue

* Foundry **Fabless

Revenue：Top 20 account for 75% of worldwide.

Spending：Tope 5 account for 66% of all

R&D：Top 10 R&D expense 28.6 billion USD，more than

sum of all the rest companies.

Capacity：Samsung, TSMC, Micron, Hynix, Toshiba, Intel

account for 43% of global capacity.

Top 10 Semiconductor Equipment Suppliers

23

2013 Ranking

Company Main Product Areas 2013 Revenue

($B)

2013 Market

Share (%)

1 Applied Materials Thin film, Dry etch, CMP, ion implant,

metrology and inspection 5.46 16.2

2 ASML Lithography 5.30 15.7

3 Lam Research Dry Etch, Thin film, wafer clean 3.16 9.4

4 Tokyo Electron Thermal processing, coat/develop

Track, dry etch, wafer clean 3.06 9.1

5 KLA-Tencor Inspection & measurement 2.16 6.4

6 Dainippon Screen

Manufacturing Coat/develop track, wafer clean 1.22 3.6

7 Hitachi High-Technologies

Dry etch, metrology & inspection, assembly

0.86 2.6

8 Advantest Test 0.85 2.5

9 Teradyne Test 0.82 2.4

10 Nikon Lithography 0.64 1.9

Others 10.24 30.3

Source: Gartner, 2014

China’s Equipment Company Revenue

and Global Market Share

24

Equipment Category 2013 Market Size

($B)

2013 Chinese Suppliers Sales

(Company 2013 Revenue：$M)

Market

Share

Exposure & Write 6.3 SMEE (Total 19): 19 0.3 %

Photoresist Processing 1.51 KINGSEMI（Total 27.4）: 21.9** 1.8 %

Etch Equipment 4.00 AMEC（Total 51.9）: 51.9

NMC (Total 32): 16** 1.7 %

Surface Conditioning

Equipment 1.84

ACM（Total: 15.8）: 15.8

Sevenstar（Total 138.7）: 4.1

KINGSEMI（Total 27.4）: 5.5**

1.4 %

Thermal Process Equipment 0.79 Sevenstar（Total 138.7）: 6.4 0.8 %

Ion Implant Equipment 0.81 CETC Beijing Electronic Equipment Co. -

TF：CVD

Sputter

Other

2.83 Piotech （Total 12.9）: 12.9** 0.5 %

1.53 NMC (Total 32): 16** 1.1 %

1.24 / -

CMP 0.74 Tianjin Hwatsing -

Inspection & measurement 37.7 Raintree（1） 0.03 %

Source: SEMI & Public information, 2014. **: Estimation

Global Semiconductor Equipment

Industry Consolidation Speedup

Mobile Internet brings explosive growth of

computing and communication terminals

10X

Source: Samsung

# of connected devices

exceeds population

50B connected

devices by 2020

Who can make money in the new

business model?

Fewer and Fewer semiconductor manufacturers

can afford the cost of leading edge fab.

Challenges of China semiconductor industry

• Global industry consolidation creates higher entry-barrier for new comers.

• China semiconductor industry started late, lack of scale & core competencies.

• Advanced IC manufacturing requires huge funding.

• Technology, talent, market, supply-chain all global for Semiconductor industry.

• Semiconductor industry is no longer a regional industry. What is China’s

positioning?

• Chinese companies’ capability to go global (technology, marketing, business

practice, decision process, …).

• Reliance on government initiatives and funding hinders competitiveness.

• Need to establish solid business model & core competencies, avoid competing

on pricing only.

Opportunities of China semiconductor industry

• Government resolve and resources to scale up China’s IC manufacturing.

• Semiconductor industry entering mature phase with narrower margin. Electronic

device manufacturing continue to transfer to Asia from US, Japan and Europe.

• Semiconductor no longer favored by investors in US. Almost NO US VC funding

to equipment and materials companies in the last 10 years.

• China’s economy scaled up: capital and talent no longer the “show-stoppers”.

• Electronic product eco-system established in China: products increasingly being

defined and developed in China (especially in mobile and consumer sectors).

• Culture, language, eco-systems, of the application market increasingly replace

cost become the new advantages.

• Abundant engineer & science graduates coming to industry.

• Cost advantage still exists.

Recent Developments of China’s

Semiconductor Industry

China IC Industry Policies Summary

“Document

No. 18” (2000)

2000.06: Policies on

further encouraging the

development of

software and integrated

circuit (IC) industry.

“Science and technology

development program” (2006)

2006.02: Circular of State Council on Supporting

Policies of Implementing Outline of Long and

Medium-Term National Scientific and Technological

Development Program (2006-2020). Define 01 project:

core devices, high end general chips, and basic software & 02

project: VLSI Equipment & Material Manufacturer and Process

Technology R&D.

“Document

No. 4” (2011)

2011.02: A Basket

of Measures to

Further Boost the

Software and IC

Industry.

“National

Guideline”

(2014 )

2014.06.24: National

Guideline for

Development of the

IC Industry.

2000 2006 Year 2011 2014

• 2014.07.29 Shandong Province issued document “ About implementation of

Document No. 4 to speed up IC industry development”

• 2014.07.31 Gansu Province issued “About Gansu Province’s implementation of

National Framework for Development of the IC Industry”

• 2014.08 Anhui Province issued document “About to speed up IC industry

development”

• 2014.08 Sichuan Province has worked out IC industry development

implementation policies, and set up IC industry investment fund. (From news, not

confirmed.)

• ………

Developing Target of 2014 Guideline

2015 2020

Total Revenue >350 Billion RMB >870 Billion RMB (CAGR > 20%)

IC Manufacture 32/28nm mass production 16/14nm mass production

IC Design

Part of key area technologies approach

international first class level

(e.g. mobile smart terminal, network

communication)

Key area technologies achieve international leading

edge. (e.g. mobile smart terminal, network

communication, cloud computing, IOT, big data, etc)

Packaging & Test

Mid- to high-end revenue > 30% revenue Technology to achieve international leading edge

Material 12 inch silicon wafer into production line. Enter global supply chain

Equipment 65-45nm key equipment into production line. Enter global supply chain

Key words:

Scale, Fund, Market, M&A,

Global collaboration, …

Revenue Target of 2014 Guideline (China IC

industry new policy)

Source: CSIA, SEMI

China IC Industry Revenue and Projection

40.5

57.5

143

$ Billion

Notes:

1. The Revenue number is the sum of China IC companies’

sales, including IC Fabless, Foundry, IDM & OSAT;

2. Revenue Target (2015) : >$57.5 Billion (RMB 350Billion);

3. Y2015~Y2020 CAGR Target: >20%

2.4

National IC Industry Investment Fund Co.,Ltd

China Mobile E-TOWN

Capital China Development

Bank Capital

National IC Fund Structure

China

Tobacco

Shanghai

Guosheng CETC UNIS SINO IC Capital

Initia

tors

Financing

Institution

Large Scale

Enterprises

Social Capital

Increase In

Capital and

Share

Responses from International Players

• TSMC: intent to produce 28nm chips in China?

– Dec 2014, TSMC has plans to produce a small volume of mobile chips in China

made on its mature 28-nanometer manufacturing technology. Chairman Morris

Chang said “We are always expanding our capacity and have plans to move a small

part of our expanded capacity to (China)…If we don't go there, Samsung will”.

• UMC: got approval for 12-inch Fab in Xiamen.

– Jan 2015, UMC got approval from Taiwan's Investment Commission to invest in a

12-inch wafer plant in mainland China. UMC will spend US$450 million of its own

funds and more than US$260 million assigned by mainland-based Hejian Technology

(Suzhou). In the future, UMC is expected to invest even more in the mainland plant,

up to about US$1.35 billion.

• GF: Exploring opportunities in China.

• … …

Active M&A in IC Design Segment

• Dec. 2013, Tsinghua Unigroup completed the merger of Spreadtrum

(US$1.7 billion )

• Jul. 2014, Tsinghua Unigroup closed acquisition of RDA(US$907

million)

• Aug. 2014, Montage announced shareholder approval for acquisition

by Shanghai Pudong Science and Technology Investment Co. Ltd. in

a deal valued at about $600 million.

• Aug. 2014, OmniVision received a preliminary acquisition proposal

from a group of investors led by Beijing-based Hua Capital

Management Ltd., worth about $1.64 billion.

• Sep. 2014, Intel invested up to RMB 9 billion (about US$1.5 billion)

for a minority stake of approximately 20 percent of the holding

company under Tsinghua Unigroup, which will own Spreadtrum and

RDA.

M&A and CAPEX Investment in A&T Segment

37

May 2013, ASE acquired Toshiba’s Wuxi plant （US$11 million ）

Dec. 2013, Texas Instruments acquired UTAC facility in Chengdu.

Jun. 2014, Siliconware started 3rd phase facility in Suzhou, and will add

advanced packaging in Suzhou.

Apr. 2014, Nepes(Korea) signed agreement for wafer package JV in Huai’an

Jiangsu.

Aug. 2014, SMIC and JCET established a Joint Venture in Jiangyin, to setup

12-inch wafer bumping and CP testing production line.

Sep. 2014, Wafer Level CSP Co., Ltd. mergered Gerad Suzhou.

Nov. 2014, TI announces to open 300mm wafer bumping facility in

Chengdu.

Nov. 2014, JCET is purchasing STATS ChipPAC ($780 million).

M&A and CAPEX Investment in A&T Segment

38

May 2013, ASE acquired Toshiba’s Wuxi plant （US$11 million ）

Dec. 2013, Texas Instruments acquired UTAC facility in Chengdu.

Jun. 2014, Siliconware started 3rd phase facility in Suzhou, and will add

advanced packaging in Suzhou.

Apr. 2014, Nepes(Korea) signed agreement for wafer package JV in Huai’an

Jiangsu.

Aug. 2014, SMIC and JCET established a Joint Venture in Jiangyin, to setup

12-inch wafer bumping and CP testing production line.

Sep. 2014, Wafer Level CSP Co., Ltd. mergered Gerad Suzhou.

Nov. 2014, TI announces to open 300mm wafer bumping facility in

Chengdu.

Nov. 2014, JCET is purchasing STATS ChipPAC ($780 million).

Semiconductor Eco-system will grow in China

as the region becomes the center of:

manufacturing, market, application

SEMI China activities

SEMICON China 2015 Highlights

http://www.semiconchina.org

March 17-19, 2015,

Shanghai

• The largest global trade show and

Semiconductor industry gathering,

cover complete IC supply-chain.

• 10 plus Theme Pavilions and 30 plus

technology and investment conferences

reflecting the latest technical trends,

market demand and Capital flows.

• 90% visitors have purchasing authority

• Market, Technology, Investment,

Networking

SEMICON China 2015 Highlights

March 17-19, 2015,

Shanghai

• The largest global trade show and

Semiconductor industry gathering,

cover complete IC supply-chain.

• 10 plus Theme Pavilions and 30 plus

technology and investment conferences

reflecting the latest technical trends,

market demand and Capital flows.

• 90% visitors have purchasing authority

• Market, Technology, Investment,

Networking

http://www.semiconchina.org

SEMI China Committees

• SEMI China Advisory Board

• Package & Test Committee

• Equipment & Material Committee

• LED Committee

• Logistics Committee

• Secondary Equipment Committee

• Wearable Device Committee

• PV Advisory Committee

• PV Standard Committee

• HB-LED Standard Committee

• Touch Screen Committee

• … …

Let us help your business in China

2014 SEMI China Member Activities

Time Program Venue Time Program Venue

March SEMI China Logistics Committee Xi'an Sumsung Programme Communication Meeting

Shanghai July SEMI China HB-LED Standards TC Autumn Meeting 2014

Harbin

March SEMI China PV Standards TC Spring Meeting 2014 Shanghai

Sept. SEMICON Europa "Innovation Village" First Show Grenoble, France

March SEMI China HB-LED Standards TC Petition Meeting San Jose Sept. 2014 Beijing International Microelectronics Symposium

Beijing

April

SEMI China Logistics Committee meeting with Xi’an Hi-Tech Industries Development Zone CBZ Custom officials

Xi'an September “SEMI China Smart Wearable Device Exhibition Area” on 15th Western China International Fair

Chengdu

April SEMI China/ICMTIA Business Mission Japan Tour Japan September SEMI China Intelligent Wearable Industry Seminar Chengdu

May SEMI China HB-LED Standards TC Kick-off Meeting 2014

Guiyang October SEMI FPD Forum on 15th Western China International Fair

Chengdu

May The Sixth Working Meeting of SEMI China Packaging and Testing Committee

NMC Co. Ltd., Beijing

October SEMI China PV Monocrystalline Committee Shanghai

June SEMI China Logistics Committee Summer Meeting Shanghai

October The Seventh Working Meeting of SEMI China Packaging and Testing Committee

Suzhou

June SEMI China PV Standards TC Summer Meeting 2014 Baoding, Hebei

October SEMI China Touch Screen Committee Preparatory Meeting

Shanghai

June SEMICON West 2014 China Night San Francisco, USA

November The 29th International Technology Partners Conference（ITPC）

Hawaii, USA

June China OLED Industry Forum and Grassland Gathering Erdos Inner-Mongolia

December 2014 India New Energy Industry Investment Promotion/Communication Conference

Shanghai, China

July SEMI China IC Summer Camp Shanghai, China December SEMI China PV Standards TC Winter Meeting 2014 Changsha

July SEMI China Intelligent Wearable Devices Seminar Shanghai, China December 2014 China FPD Winter Industry Gathering Kunshan

July SEMI China PV Standards TC Autumn Meeting 2014 Dalian, China December China Equipment and Material Committee Beijing

July SEMI China Logistics Committee Xi'an Meeting Xi'an, China

SEMI China Equipment and Material

Delegation visit Japan 2014.4

“China Night” in San Francisco 2014.7

China equipment companies meet ST Micro 2014.10 SEMICON China

Supplier Search

Program 2014. 3

SEMI China: Build a “Global Industry

Community” in China

Thank you!

alu@semi.org