The semiconductor market in the world has begun to show signs of volatility from China. "Nihon Keizai Shimbun" reported on April 24th that China, which has stepped up its domestic semiconductor manufacturing, has fully started investment in equipment. It is expected that by the end of 2018, it will begin to supply the market with cutting-edge 3D NAND flash memory chips. Excessive supply of Chinese products that have appeared in many industries such as LCD panels may also trigger price declines in the semiconductor industry.
China promotes mass production of advanced products
"We didn't believe that (Chinese companies) could move forward smoothly 2-3 years ago, but now it feels different," said the head of sales at Advantest Corporation, a large Japanese manufacturer of semiconductor manufacturing equipment. China's large state-owned semiconductor company's Yangtze River Storage Group's Yangtze River Storage Technology promotes a three-dimensional NAND production project in Wuhan, Hubei Province. The head of sales for the Advantest test stated that it is "estimated that mass production will be rapidly realized by 2018 to 2019."
Three-dimensional NAND is used in smart phones and data center storage devices. Compared with traditional flat products, the storage capacity of each chip is greatly increased. Although China plans to mass-produce products that are still far from the world's most sophisticated 3D NAND, it is said that the yield of trial products is continuously increasing.
In the "Made in China 2025" strategy announced by China in 2015, it proposed to nurture the semiconductor industry. For China, which holds a high share in the field of electronic device manufacturing, semiconductors are the most important imported products. The improvement of trade revenue cannot be achieved without increasing semiconductor self-sufficiency.
For this reason, Chinese local governments have been competing to use subsidies and other preferential policies to attract foreign semiconductor related companies at home and abroad. Ferrotec Holdings Corporation, a Japanese semiconductor company that will establish a wafer fab in Hangzhou, said that it has been “invited by many city governments”.
The International Semiconductor Equipment and Materials Association (SEMI) predicts that by 2018, China's semiconductor manufacturing equipment market will increase 40% year-on-year to 11.3 billion US dollars. Judging from this data from Chinese factories that include foreign companies, China’s market will leap to the second largest in the world, second only to South Korea, accounting for 20% of the overall market.
Not only that, but even semiconductor products that rely on the stable supply of Chinese companies have appeared. That is, the NAND-based flash memory of the previous generation of NAND products was installed in home appliances and automobiles. Due to the expansion of demand for automotive and organic EL panels, "China's foundry companies have become the nicknames for the competition" (manager of semiconductor trading companies).
In the context of declining demand for smart phones, the current NAND market performance is weak. However, every year at the beginning of the year is a period of declining demand. Many people believe that NAND will be once again out of stock before and after the start of the year-end business war with smartphone parts procurement in the summer of 2018.
What about the future? British research company IHS Markit chief analyst Nan Chuan Ming said that "after 2020, NAND supply and demand will depend on Yangtze River Storage Technology." If all of the company's plans are included, the supply will exceed the demand by 2021 at the earliest. It is expected that the NAND price of 256GB will decrease by approximately 2-30% annually between 2019 and 2021. In other words, the average unit price of US$7 in 2017 is expected to drop to US$2.4 by 2021.
China’s booming domestic demand will also help foster the semiconductor industry. It is expected that following smart phones, the data center will become the next fast-growing market. Following the North American IT giant, Chinese companies such as Tencent and Alibaba Group are expanding their investments.
China's era of pricing power will come soon
Many people think that Yangtze Storage is "currently limited to supplying low-end products." The company also faces how to ensure technical personnel and other issues.
However, the market for small and medium-sized LCD panels with a growing share of Chinese manufacturers began to be popularized with low-end products targeting Chinese smartphone manufacturers. Today, the price difference between high-precision products and Chinese products that Japanese and Korean manufacturers have advantages has narrowed to around 10%.
With the current trade frictions between China and the United States, semiconductors have also become the focus. If China increases semiconductor imports to avoid friction with the United States, it will not be conducive to the localization of semiconductors.
In the fields of steel, petrochemicals, and photovoltaic panels, it is not uncommon for China’s huge investment to cause market crashes. Some Chinese semiconductor material manufacturers also said that they would learn lessons from past experience and "will not blindly sell semiconductors, leading to an imbalance between supply and demand." However, from the perspective of both supply and demand, it may usher in an era in which China holds a dominant position in pricing.
China promotes mass production of advanced products
"We didn't believe that (Chinese companies) could move forward smoothly 2-3 years ago, but now it feels different," said the head of sales at Advantest Corporation, a large Japanese manufacturer of semiconductor manufacturing equipment. China's large state-owned semiconductor company's Yangtze River Storage Group's Yangtze River Storage Technology promotes a three-dimensional NAND production project in Wuhan, Hubei Province. The head of sales for the Advantest test stated that it is "estimated that mass production will be rapidly realized by 2018 to 2019."
Three-dimensional NAND is used in smart phones and data center storage devices. Compared with traditional flat products, the storage capacity of each chip is greatly increased. Although China plans to mass-produce products that are still far from the world's most sophisticated 3D NAND, it is said that the yield of trial products is continuously increasing.
In the "Made in China 2025" strategy announced by China in 2015, it proposed to nurture the semiconductor industry. For China, which holds a high share in the field of electronic device manufacturing, semiconductors are the most important imported products. The improvement of trade revenue cannot be achieved without increasing semiconductor self-sufficiency.
For this reason, Chinese local governments have been competing to use subsidies and other preferential policies to attract foreign semiconductor related companies at home and abroad. Ferrotec Holdings Corporation, a Japanese semiconductor company that will establish a wafer fab in Hangzhou, said that it has been “invited by many city governments”.
The International Semiconductor Equipment and Materials Association (SEMI) predicts that by 2018, China's semiconductor manufacturing equipment market will increase 40% year-on-year to 11.3 billion US dollars. Judging from this data from Chinese factories that include foreign companies, China’s market will leap to the second largest in the world, second only to South Korea, accounting for 20% of the overall market.
Not only that, but even semiconductor products that rely on the stable supply of Chinese companies have appeared. That is, the NAND-based flash memory of the previous generation of NAND products was installed in home appliances and automobiles. Due to the expansion of demand for automotive and organic EL panels, "China's foundry companies have become the nicknames for the competition" (manager of semiconductor trading companies).
In the context of declining demand for smart phones, the current NAND market performance is weak. However, every year at the beginning of the year is a period of declining demand. Many people believe that NAND will be once again out of stock before and after the start of the year-end business war with smartphone parts procurement in the summer of 2018.
What about the future? British research company IHS Markit chief analyst Nan Chuan Ming said that "after 2020, NAND supply and demand will depend on Yangtze River Storage Technology." If all of the company's plans are included, the supply will exceed the demand by 2021 at the earliest. It is expected that the NAND price of 256GB will decrease by approximately 2-30% annually between 2019 and 2021. In other words, the average unit price of US$7 in 2017 is expected to drop to US$2.4 by 2021.
China’s booming domestic demand will also help foster the semiconductor industry. It is expected that following smart phones, the data center will become the next fast-growing market. Following the North American IT giant, Chinese companies such as Tencent and Alibaba Group are expanding their investments.
China's era of pricing power will come soon
Many people think that Yangtze Storage is "currently limited to supplying low-end products." The company also faces how to ensure technical personnel and other issues.
However, the market for small and medium-sized LCD panels with a growing share of Chinese manufacturers began to be popularized with low-end products targeting Chinese smartphone manufacturers. Today, the price difference between high-precision products and Chinese products that Japanese and Korean manufacturers have advantages has narrowed to around 10%.
With the current trade frictions between China and the United States, semiconductors have also become the focus. If China increases semiconductor imports to avoid friction with the United States, it will not be conducive to the localization of semiconductors.
In the fields of steel, petrochemicals, and photovoltaic panels, it is not uncommon for China’s huge investment to cause market crashes. Some Chinese semiconductor material manufacturers also said that they would learn lessons from past experience and "will not blindly sell semiconductors, leading to an imbalance between supply and demand." However, from the perspective of both supply and demand, it may usher in an era in which China holds a dominant position in pricing.
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