China Fast Growing IC Industry: An Opportunity for US & Taiwan. Richard Chang President, CEO & Chairman of SMIC

Transcription

1 China Fast Growing IC Industry: An Opportunity for US & Taiwan Richard Chang President, CEO & Chairman of SMIC December, 2004

2 Mainland China Fast Growing IC Industry: An Introduction Update on global and Mainland China s IC industry trends Mainland China s growth provides an opportunity for all A three wins situation can be achieved through collaboration between Mainland China, US, and Taiwan SMIC s role in bridging the IC industry in Mainland China, US and Taiwan

3 Outline Worldwide Semiconductor Outlook Global Semiconductor Trend Mainland China Semiconductor Outlook Win-win Situation Opportunities in Mainland China SMIC s Role Among US-Mainland China-Taiwan Conclusion

4 Global Semiconductor Outlook: Global Semiconductor Sales Growth The global semiconductor industry is moving ahead and is projected to peak in 2007 Global Semiconductor Sales Forecast $ 300 $ 250 Sales ($ billion) $ 200 $ 150 $ 100 $ $ billion Sources WSTS, Dataquest, Mar 2004

5 Global Semiconductor Trend: Fabless Model Success and IDMs Outsourcing Trend Rapid fabless expansion boosting global foundry business Fabless share of total industry revenue will increase from 8.8% in 2000 to 12.5% in 2005 IDM continual outsourcing strategy Outsourcing growth from US$3.2bn in 2001 to US$6.5bn in 2005 Foundry market will increase from US$10bn in 2001 to US$22.1bn in 2005 IDM (Integrated Device Manufacturer) / System Company Partial outsourcing Partial outsourcing Fabless design Foundry (dedicated foundry & IDM) house Outsourcing Outsourcing Packaging company Testing company Shipment Sources Dataquest, Semico Research 2003, Nomura Asian Equity Reseach 2004

6 Global Semiconductor Trend: US-Mainland China-Taiwan IC Market Outlook Mainland China/HK CAGR will significantly outpace the US and Taiwan Global-US- Mainland China/HK-Taiwan IC Market Forecast US$ bn $ 70 $ 60 $ 50 $ 40 $ 30 US Taiwan US CAGR: 7.3% Mainland China/HK Taiwan CAGR: 13.8% Mainland China/HK CAGR: 21.5% to 27.7% $ 20 $ F 2005F 2006F 2007F 2008F Source IC insights, Jan 2004

7 Mainland China Semiconductor Industry Outlook: Application Market Growth Smart Phone Demand PC Demand Demand (mn units) Smart Phone CAGR 46.3% Demand (mn units) CAGR: 18.2% E 2004F 200F5 2006F Digital Camera Market Digital Consumer Product Market Demand (mn units) Demand (mn units) CAGR = 28.7% Demand (mn units) MP3 Player Flash Disk PDA Source: CCID, Feb Source: CCID, Feb. 2004

8 Mainland China Semiconductor Industry Outlook: Global Semiconductor Industry Supply Chain Migration IDMs, Fabless, Manufacturing, Testing and Assembly companies shifting to Mainland China Toshiba TI Intel STATS/ChipPAC AMD Freescale IBM Fairchild Amkor ST Philips Infineon Mainland China Elpida Hitachi NEC Samsung Sony TSMC ASE Group SPIL

9 Mainland China Semiconductor Industry Outlook: Semiconductor Industry Supply Chain Maturing IC Design Houses: 460+ Foundry: More than 35 fabs (4 to 12 ) Assembly and Testing: 180+ companies 5000 $ $ $ $ $1.0 0 Mainland China s IC Production Value by Sector Design Manufacturing Testing&Packaging US$ bn US$ bn $ bn $ 0.59 bn $ 0.27 bn US$ bn $ bn $ bn $ bn $ bn $ bn * $ 0.90 bn E Production value: The value of goods produced according to market price Source: China Center for Information Industry Development (CCID), 2004

10 Mainland China IC Industry Supply Chain: IC Design Industry Growth Mainland China s IC design industry continues to grow and is projected to reach $3.5B in 2008 Mainland China IC Design Revenue Forecast Taiwan IC Design Revenue by Country (2004F) Mainland China 33% Others 23% Revenue US$ mn $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ Revenue: income from sales E E E E E Taiwan 44% Mainland China has become the biggest importer of ICs made in Taiwan Largest 3 Design Service Makers in Mainland China In terms of 2003 revenue, IP Core (China) with $5 mn Faraday (Taiwan) with $3 mn Veri Silicon (US) with $1 mn Sources: CCID, Feb 2004, Nomura, Sept 2004

11 Mainland China IC Industry Supply Chain: IC Manufacturing Capability New foundry players will serve to boost Mainland China s already growing IC manufacturing capabilities and further strengthen its IC value chain Numbers of Fabs by Wafer Size Number of Fabs by Technology # of fabs SMIC: SMIC " 5" 6" 8" 12" *Not included 3 fabs # of Fabs SMIC: >=1µm 0.6/0.8µm 0.5µm µm SMIC µm & below Sources: isupply, Yuanta Core Pacific Securities, SIA, SMIC collection, July 2004

12 Mainland China IC Industry Supply Chain: Assembly and Testing Industry Growth Emerging foundry market and international packaging companies presence will drive Mainland China s assembly & test industry to $10.3 bn in 2007 Mainland China Assembly and Test Industry Forecast Major Foreign A&T Players in Mainland China 16% of global A&T market Represent 30% of global A&T market Amkor (US) STATS (US) SPIL (Taiwan) ChipMOS (Taiwan) ASE Group (Taiwan) Freescale (US) National Semiconductor (US) *isuppli: Including board level assembly and test Sources: isuppli, 2003

13 Outline Worldwide Semiconductor Outlook Global Semiconductor Trend Mainland China Semiconductor Outlook Win-win Situation Opportunities in Mainland China SMIC s Role Among US-Mainland China-Taiwan Conclusion

14 Emerging Opportunity A win-win situation can be achieved through collaboration between US- -Mainland China-Taiwan US Strength Technology & R&D IDM & Fabless Model Business Model/skill Investment Capability Equipment & Material Industry Taiwan Strength IC Supply Chain IC & System Manufacturing Capability Business Model/skill Technology Mainland China Strength End Market IC & System Manufacturing Capability IC Supply Chain Favorable Macro and Industry Conditions Win-win Situation

15 Opportunity 1: IDM and Foundry Relationship Major Dedicated IDMs Outsourcing Major Foundries US TI IBM Freescale Agere Systems Fairchild Analog Devices LSI Logic Intel Others Samsung Toshiba NEC ST Infineon Philips Technology Capacity Market Mainland China SMIC GSMC HH NEC ASMC Hejian Taiwan TSMC UMC Others Chartered Dongbu 1 st Silicon Siltera Tower IDMs Benefits Focus on product design and R&D Reduce manufacturing cost risk (Each new 300mm fab with capacity of 25K wpm cost ~US$2.5bn: Nomura Asian Equity Research) Foundries Benefits Gain technology & know-how Higher utilisation rates Source: Nomura Securities Taipei

16 Opportunity 2: Mainland China End/System Market Growth Mainland China s System Market Growth ( ) Growth Rate (%) 40% 35% 30% 25% 20% 15% 10% 36.30% * 26.20% 24.40% 20.80% * Fabless and IDMs Benefit Demand driver Driving growth of US, Taiwan and other regions fabless and IDMs 14.90% 14.90% 12.90% 7.70% * 5% 0% DSC (* ) Auto System MP3 Player LCD Monitor (* ) Notebook PC Desktop PC DTV Handset (* ) Major Fabless&IDMs Players TI Zoran Micron Sunplus Freescale STMicro Infineon Cirrus- Logic Zoran Samsung Sharp Genesis Samsung Systech Sunplus Intel AMD Nvidia VIA ATI TI Zoran Broadcom TI Freescale Qualcomm Agere Samsung ATI Broadcom Sources: CCID, Wi-Fi alliance, DisplaySearch, Gartner

17 Opportunity 3: Mainland China s Domestic IC Supply Shortage Demand and supply gap getting bigger where Mainland China would have to import about 80% of ICs to meet the demand. China s IC Demand and Domestic Supply Benefits USD$ billions IC demand (isuppli) IC demand (CCID) Domestic supply Widening gap Room to accommodate more players Foreign manufacturer shifting to Mainland China F 2005F 2006F 2007F 2008F *isuppli: Including board level Source: CCID, isuppli, 2004

18 Opportunity 4: Mainland China s Semiconductor Equipment Demand Growth US$ bn $25 $20 $15 $10 $5 $0 Regional Equipment Markets (2002 & 2003) Europe Japan Korea US Taiwan Rest of World $22.3 bn Market Share: $19.8 bn $3.3 bn ROW: 14.9 $2.7 bn $2.9 bn Twn: 13.0% $3.5 bn $4.7 bn US: 21.1% $5.9 bn $3.2 bn $1.7 bn $3.9 bn $5.6 bn $2.1 bn $2.6 bn Major Equipment Suppliers Mainland China s Equipment Market (2003) Back End $203 mn Back End $203M Total: $1.16 bn (Mainland China represent ~36% of ROW) Benefit Front End $953Mmn Applied Materials, Tokyo Electron, ASML, Nikon, KLA-Tencor, Canon, Advantest, Novellus, Varian Semiconductor Equipment, Axcelis, Mattson, LAM Research, SCP, Rudolph Technologies, FSI International Mainland China semiconductor industry supply chain growth creates opportunities in regional equipment markets Source: SEMI, Mar 2004

19 Opportunity 5: Mainland China Partnering for Profitability With favorable environment and conditions, Mainland China has ample incentives to attract fabless, IDM and foundry partnerships. Benefits of Partnership with Mainland China Cluster effect in Mainland China: Yangtze River Delta, Pearl River Delta, Bohai Gulf and Western China Huge talent pool: access to engineering graduates from Mainland China s leading universities Lower manufacturing cost: land, utility and labor costs Proximity to huge and fast growing IC market: Improving time to market and reducing costs

20 Outline Worldwide Semiconductor Outlook Global Semiconductor Trend Mainland China Semiconductor Outlook Win-win Situation Opportunities in Mainland China SMIC s Role Among US-Mainland China-Taiwan Conclusion

21 SMIC s Role: Bridging US-Mainland China- Taiwan Semiconductor Industries US Mainland China (SMIC) Taiwan Partnership/Alliance: IP/Library/EDA: ARM, Cadence, Mentor Graphic, Synopsys, Artisan, Aplus, Magma, MoSys, VeriSilicon, Virage Logic and more Technology: Toshiba, Fujitsu, Chartered, IMEG, Infineon, Elpida, Toppan, TI Equipment (61% from US): Applied Materials, Varian Semiconductor Equipment, Novellus, Axcelis, KLA-Tencor, Mattson, Semitool, LAM Research and more Financial Investors (~58% from US): NEA, Goldman Sachs, H&Q Asia Pacific, ISSI,OAK and more Employee breakdown: >280 from US and >560 from Taiwan Winning the market for US (41.8%) and Asia Pacific (31.5% with Taiwan having the majority stake) As one of the major foundries in Mainland China, SMIC plays an important role in enhancing the cooperation between the US-Mainland China-Taiwan semiconductor industries

22 Outline Worldwide Semiconductor Outlook Global Semiconductor Trend Mainland China Semiconductor Outlook Win-win Situation Opportunities in Mainland China SMIC s Role Among US-Mainland China-Taiwan Conclusion

23 Conclusion Mainland China s burgeoning semiconductor industry creates tremendous economic rewards for the whole electronic supply chain Strong growth in Mainland China s semiconductor demand will continue to attract other major players to participate in healthy competition that benefits the customers US-Mainland China-Taiwan can collaborate more closely to minimize threats, enhance trade opportunities and promote win-win partnerships SMIC is committed to play a key role in supporting the global semiconductor industry through partnership and collaboration with US and Taiwan players.

24 Thank you