Analysis of foreign IC tyrants and national markets

Why do about 75% of China's IC industry's market is occupied by foreign IC suppliers, especially when some high-end chip companies basically rely on imports? Why is the gap between IC designers at home and abroad so great? Why is China's IC industry struggling to pursue import substitution goals that are far from being achieved?

Before we start this topic, let us first look at a few data
Data 1: In 2012, China's IC market totaled as high as 855.85 billion yuan (about 136.28 billion US dollars), which accounted for 46.7% of the world's 291.56 billion US dollars in the semiconductor market over the same period. It has become the world's largest integrated circuit application market. However, even in the same period, China's entire IC industry, including IC design, chip manufacturing, and package testing, had sales of only 215.84 billion yuan, accounting for only 25.2% of market demand. In other words, about 75% of China's IC market has so far been occupied by foreign IC suppliers, especially in the high-end microchip (CPU, GPU, MCU and DSP, etc.), large-capacity memory, automotive electronics, communications chip SoC standard The application-specific integrated circuits (ASSP) and analog circuits (high reliability ADCs/DACs, high-power devices, and sensors) basically rely on imports.

Data II: In the global IC design industry, Qualcomm’s sales in the United States ranked first in 2012 with US$12.976 billion, and MediaTek’s sales in Taiwan ranked No.1 with US$3.395 billion, ranking No. 1 in China. The amount was 7.450 billion yuan (about 1.192 billion U.S. dollars), which was only 9.2% for Qualcomm and 35.1% for MediaTek.

Data 3: In 2003, China's IT industry output value was 1.88 trillion yuan, profit was 75 billion yuan, and profit margin was 4.0%; in 2005 China's IT industry output value was 3.84 trillion yuan, profit was 130.7 billion yuan, and profit margin was 3.4%. In 2009, the output value of China's IT industry was 5.13 trillion yuan, with a profit of 17.91 billion yuan and a profit rate of 3.0%; China's IT industry has developed rapidly. Now the output value has exceeded 10 trillion yuan, and the profit rate has been decreasing year by year. Based on the above data, it can be seen that although China's integrated circuit industry has not developed itself after years of development, the import substitution target pursued for many years is far from being achieved.

Why does this happen?

The reason may be a little paradoxical. Perhaps it is precisely because we have been pursuing import substitution for so many years that the understanding of the development of the integrated circuit industry is too simple, anxious for success, and lacks anything to do. The CPUs and memory in previous years Years of mobile internet technology, sensors, headaches, and foot pain. However, the establishment of an integrated circuit powerhouse cannot be achieved by merely grasping one or two core technologies or one or two product breakthroughs. Only when the independent and controllable information industry system is truly established, just as our predecessors established an autonomous and controllable industrial system in the era of “two bullets and one star”, it is the time for the revitalization of China's integrated circuits. Only at that time can we truly achieve the “wish” of import substitution.

Why is it so important to establish an autonomous and controllable industrial system?

An example can be given. I do not know if everyone notices a seemingly contradictory phenomenon: In the computer field, manufacturers who make chips are more likely to make money than complete manufacturers. For example, Intel’s profitability is far from that of Quanta, Foxconn, and Lenovo; but in the field of mobile terminals, The manufacturers who make chips are not as good as the manufacturers of the whole machine. For example, Apple and Google have high profits, while domestic Spreadtrum and Rockchip Microelectronics have broken their heads in order to provide them with chips.

Why is this so? The key issue is not that the company is located upstream or downstream of the industrial chain, nor is it the mastery of one or two technologies. The industry is advanced to the advanced stage. The core of competition is no longer to control the technology itself, but to control the industrial ecology. The so-called establishment of an autonomous and controllable industrial system means that we must strive to be the “big boss” so that we can design a business model that is beneficial to ourselves. Behind every industrial system, there is its own technology platform. Who controls the dominance of the technology platform and who controls the industrial system? Such as Wintel's "sales upgrade", Apple's machine plus Apple, Google's search plus advertising. Jobs's most valuable part is that he always insists on his own system, insists on hardware and software integration, and even refuses Microsoft to support Apple on the Windows platform, and ultimately achieves a better user experience than the Wintel system. Therefore, it is essential to fundamentally change the current situation in which the Chinese IC industry is controlled by people and import substitution is difficult to achieve, and the establishment of an autonomous and controllable industrial system is fundamental.

The key to establishing an autonomous and controllable information industry system is to establish an autonomous and controllable technology platform.

One is that the basic hardware must provide support. For example, CPU, bridge chip control. The computer motherboard is centered on the bridge chip, and the CPU is also a peripheral component of the bridge chip. Intel has been controlling the industrial chain by bridging chips, and has arranged several patents on the interface of CPU and bridge chip.

The second is that basic software should be able to unify technical specifications and form synergy. As Microsoft and Intel join hands to rule the PC era, the importance of basic software can be seen. At present, there are more R&D staff in the open source community than Microsoft, but there is no synergy. In order to form a joint force, it is necessary to analyze the interface relationships among the domestic basic hardware and software products, sort out the work direction of each product's adaptation and optimization, define the external interfaces of each product, establish interface specifications for related software layers, and improve the work efficiency among all units. Effectively solve the problems of individual warfare and adaptability problems that arise in the application adaptation of domestic basic hardware and software.

Of course, establishing an autonomous and controllable information industry system is not easy and requires long-term accumulation. However, after a thousand miles away, after several decades of development and accumulation, China’s IC has come to face this moment of all things.