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Financial turmoil, Chinas IC design industry to save the day

In Electronic Infomation Category: R | on May   2, 2011

2007 by the end of Design Branch of China Semiconductor Association Chairman Wang Qin Sheng had predicted that: "2008 was a watershed in Chinas IC design industry, the investment peak (around 2004) after four years, many companies are dead or alive, 2008 will see the outcome. "

Sure enough, in late 2008 to early 2009, the global semiconductor market, the impact of weak prices, and IMP813LEPA datasheet and the international financial crisis, Chinas IC design industry suffered an unprecedented crisis. According to the China Semiconductor Industry Association data, 2008 Chinas IC design industry, while still achieving a positive growth of 4.2%, but increase in 2007 compared to 21.2%, the growth rate also declined sharply.

Growth rate fell, the more worrying is, after a frenzy of 2004 to 2006, the venture capital (VC) on the Chinese IC design industry in 2007 after concern about the rapid cooling. According to market research agencies ThomsonFinancial the statistics, in 2004 Chinas IC design industry, VC investment totaled $ 310,000,000, 2005 and IMP813LEPA price and 2006 about 2.1 billion U.S. dollars, 2007 and IMP813LEPA suppliers and 2008 were 0.79 and 0.90 billion U.S. dollars, although the investment plan the number of stable, single investment but has dropped significantly. Spreadtrum particularly in June 2007 as the representative of the difficult market (lack of confidence of investors eager to cash), marking the VC on the "China chip" investment boom was temporarily a paragraph has been on Chinas IC design industrys concern has shifted.

VC funds rely on these for years, Chinas IC design industry is running is undoubtedly cruel. According to reports out of the news has to see not only the start-up companies, even if, as COMMIT, Comlent, Legend, Fudan micro-nano, Shanghai An Fan, Beijings new coastline, Shanghai Longjing, Phoenix Microelectronics, each core integration , Chipnuts and a number of industry-leading IC design company is also struggling with bleak prospects, product development and financial failure of fracture, collapse occurred in 2008, the sale and layoffs and so on. As a result, market research firm iSuppli, even expected, at least the next two years more than 100 IC design companies in China disappeared. Fabless IC design industry in China will appear polarization, about 50 companies may be successful, the rest are struggling to survive.

Fact, the Chinese IC design industry also emerged the current crisis has a long, in macroeconomic fanatic in 2006 and 2007, Chinas IC design industrys problems have emerged. China Semiconductor Industry Association, according to data released from 2002 to 2006 sales revenue of China IC design industry in 2002 to 2.16 billion yuan from the expanded to 18.62 billion yuan in 2006, 4 years, 3 Fan doubled, the average annual compound growth rate of 71.3% , for the same period of highest in the world. But since 2007, the domestic IC design industry as a whole is slowing down the pace of development, Chinas IC design industry also led to deep-seated contradictions have become increasingly exposed: a small company very much, and big companies do not strong, single product, sustainable development capability . After 5 years, the enthusiasm from the government to the private sector sought after and large-scale investment, the Chinese did not create a powerful "China chip", and just when the financial turmoil hit Quedui played in this crisis a catalyst for industry role.

Lack of a sustainable competitive "China chip"

Located in the worlds largest semiconductor market, coupled with large amounts of capital (foreign VC investment in private capital to the government), talent and technology (Silicon Valley returnees), good policy (land tax funds to support all levels of government), gave birth to why China did not number of IC design company bigger and stronger, but gradually into the winter?

From three aspects, we may be able to answer this question: First, from the environment point of view, the global semiconductor industry is gradually matured, although the total production of IC products and will continue to increase total sales, but profit margins it will certainly continue to decline, the semiconductor industry is set to become a profit. Market and price competition will become increasingly fierce, and in this period, the survival of small and medium companies like conditions will become increasingly difficult.

Specific to the Chinese market, most of the design company is focused on the consumer demand for larger IC fields, get together a serious problem, the natural result of market competition has become fierce. Lower prices with each other, resulting in vicious competition degree of the scale of most enterprises are not high. In the long run, which is to improve the competitiveness of companies is very unfavorable. Replacement of consumer products coupled with the speed very nature, product integration requirements of very high start-up companies in China have faced IP accumulation and lack of integration of such issues is not strong integration capabilities, which led to the domestic IC design companies weighed on the product updates exacerbated the plight of survival.

In addition, China is the strength of intellectual property protection is extremely weak. Imitation is not the bottom line and the "optimization" is often a result of chaos persists in the form, the emergence of similar companies and competition fierce, so that innovators unprofitable. In short, the Chinese IC design companies face is to sum up the external environment: lack of funds, technology has insufficient capacity, brand-building slow, industry concentration is not enough.

The objective environment in addition to industry, the rapid development of the next few years, many IC design company in China there are also serious overheating, foam and impulsive phenomena. As capital markets in this regard "excessive enthusiasm", it also causes a large number of IC employees on their own passion in name, the concept of speculation, is not reassuring and realistic. This situation is not from a long period of time there is Legend, COMMIT, Phoenix Microelectronics, Microelectronics and other security companies who broke the redundancies, gangs everywhere, chaos and other news can be seen the process. But the capital market is the most realistic, it can help us to heat up, will be the fastest way to help us cool down, the foam blowing industry, the fight back to the prototype.

Course, the Chinese IC design industry to todays most fundamental reason for this step may or technical innovation, lack of sustainable development to find their own core competencies. After all, the semiconductor industry is a global high-tech industries, relative to the U.S. semiconductor industrys technology leader, Japans semiconductor industry, vertical integration system vendors, China Taiwans semiconductor industry and cost advantages of scale in mainland China IC design industry is actually not found sustainability of their core values and strengths, so adverse changes in the external environment the most susceptible. Perhaps Chinas currently the only advantage is that the survival of close to the market, the reaction speed. But the cost and time to market is difficult to become a sustainable advantage, especially when European and American manufacturers have begun to realize, after this issue.

Bottom out of the Road

View of the above, the Chinese IC design companies in order to bottom out, the most important issue is the need to first select out for their own market, and select the appropriate cut time to get together to avoid the phenomenon. Although the international semiconductor industry has matured, but compared to Chinas development and abroad will have a lag, which gave the Chinese IC design industry a grace period, coupled with Chinas vast market space, as long as the choice of direction Chinese IC companies are still bigger and stronger opportunities.

Currently, the industry generally believed that before the commercial TD-SCDMA is the rise of the mobile phone industry a unique opportunity, but also stimulating the development of the chip industry, so both the Government and IC design companies have invested heavily in this area of financial and human, TD baseband chip has been formed T3G, Spreadtrum, Datang - MediaTek (ADI) of three camps, industry has taken shape. Of course, from the 2008 TD-SCDMA commercial trial of the effect of view, not satisfactory, TD mobile phone sales throughout 2008, only a few one hundred thousand, far less than the 2G phone. The outbreak of the 3G market is expected to wait until after 2010.

CMMB demodulator chip is the last year and even for some time, IC design companies most concerned about another market. 2008 Beijing Olympics will be held, on the mobile TV market played a very significant role in driving.

With the majority of the "cottage" and the mobile device market driven, CMMB chip shipments rapid growth, estimated in 2008 CMMB chip size of the overall market has reached millions of stars. In addition to early entry into the Creative Video, Telepath two, the development of information, the Israeli company Siano, Suzhou Branch in the semiconductor, microelectronics and other Chinese Academy of Sciences has published CMMB demodulator. I believe CMMB mobile TV market in the price effect, will have a more rapid growth.

In handling relations with the external environment, the Chinese IC design companies should adjust their own impetuous mind, and with the chain of enterprise cooperation and innovation, and strive to reduce costs, re-Picking competitiveness. IC design in this industry need to stop and focus on one area, a few years of accumulation, there will be no return. Only real, working sense of the company to be successful.

Finally, and most important point. The semiconductor industry is a global industry, the future competition between companies on the overall strength of competition, although the operating costs low and fast response of Chinese IC design companies to help complete the primitive accumulation, but to grow into large companies and get rid of the cost of the cycle, still need technological innovation.

In fact, there are so many scientific and technological innovation can not be original, the introduction, digestion and re-innovation is also an innovation, such as the original purchase of LSIs DSP core licensing business. In addition, the innovation not only include technical innovations, but also business model innovation, management innovation and corporate culture of innovation, such as IC design companies in the future in order to move forward with ease, using the design foundry services is a good business model innovation.

Most modern Chinese fabless semiconductor company to do anything, including market analysis, product definition, algorithm and architecture, front-end and back-end design, promotion, sales and customer service. At the same time, these companies often focus on only one or two products. This approach is thankless, it increases the management cost and delay to the speed of response to market changes. Therefore, the Chinese IC design companies can delegate many operations to other companies, and other vendors in the high-tech cooperation. By outsourcing non-core business so IC design companies focus on their core business: product definition, front-end design and intellectual property (IP) and so on.

Calls for $ 1,000,000,000 IC design company

In fact, although the 2008 growth rate of Chinas IC design industry, large-scale landslide occurred in a sector of the crisis, but there are still a group of pragmatic, close to the Chinese market, IC manufacturers to grow up quickly, and in some areas of pose a threat to Japanese and Korean companies in Europe and America, of which representatives of Fuzhou Rockchip, Beijing Jun positive, Huawei Hass, Hangzhou Guoxin, St state microelectronics, BYD Microelectronics, Beijing Si Wang Electronics, Shenzhen, long-Express, Haier IC, and so on. They are diligent, alert and flexible, and fully understand the Chinese market has been through the financial crisis of the machine to Japan and South Korea launched a powerful challenge to IC. Chinas IC design industry because the current low-end-oriented application based, the final products are also sold to Asian and African Latin American market, the impact of the economic crisis than for smaller high-end European and American counterparts.

Therefore, another perspective, perhaps this round superimposed with the global economic crisis, the industry crisis is an excellent opportunity for the Chinese IC design industry in the elimination of poor integration of the weak, after a more healthy state forward. Phoenix only after the ashes will be more beautiful. Maybe in time, China really can appear one or more 10 billion dollars in IC companies. This is also a lot of Chinese IC industry and dreams of glory.

In this process, the Chinese government should play a role in perhaps the most is to standardize the domestic industry environment. Because the resulting "China chip" predicament of view, IC companies in China is not the lack of markets, human resources / technology, capital and incentive policies, and we do not address precisely equal opportunity to compete, market conditions for fair competition, standardized management, and strong intellectual property protection, the foundation of high-tech industry development issues, thus creating a healthy industrial environment. And break the current "China chip" clients in this critical dilemma.

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