Semiconductor Industry in China & Taiwan The leapfrogging strategy and business model of latecomer’s strategyThe suggestions to catch up.

China is the biggest Semiconductor market China is the biggest market in the world . Most of the semiconductor

companies around the world are strongly rely on Chinese market, the 50% of their revenue come from China.

If you can seize the opportunity of Chinese market ,you will win.

2000Y 2014YAnnua

l growt

hcountry

Market

scale(billion

)

Market

share

Market

scale(billion

)

Market

share

USA 64 31.3% 66 19.7% 0.2%EU 42 20.7% 38 11.4% -0.7%JAPAN 47 22.9% 35 10.6% -2%CHINA

11 5.6% 169 50.7%

21.5%

50%>40%

The semiconductor application in China is changing

customer telecom vehaicle computer IC Auto else

26.10%20.80%

1.50%

41.40%

0.80%

7.00%2.40%

21.60%

28.50%

2.50%

34.40%

0.00%

9.10%3.90%

The component ratio of chinese semiconductor application

maket

2007 2014

UP

Down

N/A

COMM\Consumer\Computer contribute a lot to the Chinese semiconductor market in the past 10 years.

But the Auto and Vehicle is increasing fast and may become the new sources of growth.

Chinese Semiconductor market rely on input Grow fast: The sales of Chinese semiconductor increased nearly 20% annually in the

past 9 years. Self-sufficient is poor: In 2013, China inputted semiconductor valued 231.3 billion

dollar which is second largest product inputted. In 2007, the proportion of Self-

sufficient is 10% ,then it increased to 20% in 2014。Year Input Output Net IP

2007年 1285 236 10492008年 1293 244 10492009年 1199 233 9662010年 1570 293 12772011年 1702 326 13762012年 1921 534 13872013年 2310 877 14332006 2007 2008 2009 2010 2011 2012 2013

0

50

100

150

200

250

300

350

400

450

-15%-10%-5%0%5%10%15%20%25%30%35%

21%

5%

-9%

29% 29%

7%11%

The total sales of chinese semi-conductor market

Unit: Billion RMB;Resources:中国半导体产业发展状况报告 ,2013

NEED

Supply

Version 1.0: Build the system of semiconductor industry

Huge Mark

et

Investment

Policy

Foreign

Technology

InputTaiwan-Direct Investment; the others -Joint

venture company

Build the Industry System

Cultivate the Local Company

Self-sufficient partly

Chinese Semiconductor systemDesig

n

Manufacture

P&T

Joint ventur

e

Version2.0: Try to improve the structure

Design

Manufacture

Package

testing

Material

Equipment

Discrete Component

Integrated Circuit

Terminal

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

51%

50%

50%

45%

44%

50%

48%

44%

40%

31%

32%

31%

31%

31%

22%

23%

31%

27%

19%

18%

19%

24%

25%

27%

29%

25%

33%

The structure of semi-conductor industry in

chinaPackaging Manufacture Design

mater

ial

IC desig

n

IC Man

u

IC P&T DI0%

10%20%30%

Rate of profit

Version 3: Great-leap-forward development Unlike the other countries, Chinese government can support a lot of resource

to develop the industry and have a long-term plan. In2014, government release Outline for the development of national

integrated circuit industry.

Investment

Joint R&D system

Re-organization and Merger

Chinese market

Industry system

Technology

Industry system

Scale enlarge

GOAL• 2020,IC industry

should reduce the disadvantage compared to leader, the P&T industry should become the leader. A perfect industrial system should be build.

• 2030, IC industry should be the leader in the world, some local company become the international company.

StrategyResources Platform

Investment

funds(20BD)

Policy support

Industry Associatio

n

Chinese semiconductor catching-up tactics-Joint R&D system Unlike IDM and specification model .Chinese semiconductor industry set

up the model of Joint R&D system to catch up with the latest technology development.

• Focus on one area• Flexible• Hard to cooperate with

the different standard • Delay time to market• Cannot fit the specific

demand

IDM（ Integrated Device Manufacturer）

• The company will do all of the things

• High profit rate• High Internal resource

integration capability• High cost that can restrict

the development of technology

• Slow reaction to the market change

Specification Joint R&D system

Design Manufa

cture

Package

testing

Design

Manufacture

Package

testing

• Cooperate and influnce the partner.

• Improve the technology\efficiency and quality

• Reduce the risk• Cooperation Capability

Chinese semiconductor industry also face several threatens

Currency exchange rate

Application of semiconductor

Human resource cost

Growth of economic

The semiconductor application worldwide

In the future, the application market will focus on the Automotive\Comm\Ind\Med\Gov\Mil while the computer and consumer usage will slow down.That is quite a challenge to most of Asian semiconductor companies.

TSMC

Taiwan Semiconductor Manufacturing Company

＝ 2.88兆円（現時点レート）

Company Profile• Founded in 1987• TSMC's 2013 total sales revenue reached a new high at

US$20.11 billion.• 3rd largest semiconductor company, #1 foundry in the

world• Reuters 2013 top 100 Global Innovators (the only Taiwanese

company in the list)• Employees ~40,000• three 12“ Fab, four 8” Fab(1 in US, 1 in China), one 6“ Fab

and two backend fab• HQ in Hsinchu Taiwan, has account management and

engineering service offices in China, Europe, India, Japan, North America, and, South Korea.

Brief History

Right place, right time. 「天の時、地の利、人の和」

• 1987:Taiwan Semiconductor Manufacturing Company Ltd. (TSMC) is formed as a joint venture between the Taiwan government and Philips Electronics NV.

• 1994:TSMC becomes a public company.• 1996:TSMC and joint venture partners begin construction of a

wafer fabrication plant in Camas, Washington, called Wafer Tech.• 1999:TSMC acquires a 33 percent interest in Acer Semiconductor

Manufacturing, Inc.• 2000:TSMC completes acquisition of Acer, acquires Worldwide

Semiconductor Manufacturing Co. for $550 million, and takes control of Wafer Tech.

Timing

Business Model Innovation--FoundryIn microelectronics, the foundry model refers to the separation of a

semiconductor fabrication plant operation (foundry) from an integrated circuit design operation, into separate companies or business units.

TSMC’s way to success

TSMC Core Values• (I)ntegrity • (C)ommitme

nt• (I)nnovation• (C)ustomer

Trust

New definition of TSMC

• Technology Leading• Service Turkey Solution• Manufacturing Yield High• Customers First Priority

Halo effect--Morris Chang(張忠謀 )• Born: 10 July 1931 (age 84)Ningbo,

Zhejiang, China(中國浙江省寧波市 )• Alma mater:

Massachusetts Institute of Technology (B.S., 1952; M.S., 1953)

Stanford University (Ph.D., 1964)• Occupation: Chairman and CEO of TSMC• Career:

Texas Instruments (1958–1983), Group Vice Presiden

General Instrument Corporation (1984–1985), President and Chief Operating Officer

Founded TSMC in 1987

HR Department• ~200 staff• worldwide recruiting (US, Malaysia, India,

etc.)• in-house course training with credits (work

with National Cheng Kung university)• employee wellness program• campus friendliness program• JOS (job opportunity search)

Taiwan• Support from local government• Good relationship with the USA and Europe• Special relationship with China• Good location• Cost of labor

What are your suggestion

单击图标添加图片

Semiconductor: and the same type of characteristic of industry # :High technical content #: High barriers to entry (technology & fund) #: Long life cycle (superiority & long-term)

Layout:

Feature & RankCountry/area

STRENGTHS WEAKNESSES

USA standard setters High cost and high riskJAPAN the embedded & field

of consumptionHigh cost and non leading advantage

KOREA High production tech. Ability to design, investment

TAIWAN Ability of productive & integration

Wisdom force support(insiders human resources)

CHINA Low cost & Government Support power

Weak basis

Cycle & division

Initial stage: vertical integration (IDM) Growth & mature: division (spread risk & reduce cost) Decline stage: vertical integration

The competition model Technology can be plagiarize Human cost non reversibility

*tech leading *open & cooperation (e.g. Fuji & Kodak in china )

suggestions 1、 Judge industry cycle. (you have to choose the entry point of the growth and mature period) 2、 Set up their own industrial chain integration advantages.(for example TSMC: not only a factory , but the transfer station between R&D and marketing ) 3、Using the business competition between multinational companies .(for example: TSMC acquire 30% order by Apple ) 4、 Exchange market for technology END