China chip design expert warns of losses due to industry overcrowding, says more cautious path to self-sufficiency is needed
- Wei Shaojun said Chinese firms should be careful with efforts to achieve greater self-sufficiency in the chips sector
- Wei said US curbs will make it harder for China to produce the computing power it needs to develop supercomputers and artificial intelligence
China’s chip design industry is facing a sea of losses this year amid excess competition and a rush into the sector due to Beijing’s focus on greater self-sufficiency, a leading Chinese semiconductor industry expert warned.
Wei Shaojun, president of integrated circuit (IC) design at the China Semiconductor Industry Association (CSIA), told a forum in Guangzhou, capital of southern Guangdong province, on Friday that large swathes of the chip industry would end up in the red this year because of the “blind pursuit” of success in an “extremely difficult” environment.
Wei said although China’s IC design sector achieved 8 per cent growth amid challenging conditions – a reference to tougher US trade sanctions – a majority of these enterprises were not in good shape.
Wei said Chinese firms should be careful with efforts to achieve greater self-sufficiency in the semiconductor sector to avoid domestic replacements of foreign products being considered as “low end”. He added that various challenges remain when it comes to achieving breakthroughs in high-end chips.
China’s SMIC amasses chip-making tools with spending bump as US escalates curbs
In updated rules last month, the US Bureau of Industry and Security tightened export restrictions on both semiconductor equipment and advanced artificial intelligence (AI) chips. Wei said the move will make it harder for China to produce the computing power it needs to develop supercomputers and AI systems.
China added 208 new IC design companies in 2023, bringing the total number to 3,541, up from 3,243 in 2022, according to a presentation by Wei, who cited a report by media outlet Semiconductor Industry Observation.
The IC design industry’s total revenue this year is expected to reach 557.4 billion yuan (US$76.7 billion), up 8 per cent from 2022, although this growth rate is 8.5 percentage points lower than 2022’s rate, according to the same report.
During the first half, 108 listed IC design companies reported total revenue of 135.8 billion yuan, accounting for 23.5 per cent of the industry total, while of those 108 listed firms, 42 ended up in the red during the first half.
The Pearl River Delta region saw the highest industry expansion rate of 49.7 per cent, and Shenzhen, the southern tech hub home to telecommunications gear giant Huawei Technologies, contributed the bulk of this headline expansion rate.
With 140 billion yuan of revenue, Shanghai still tops the chart in terms of absolute industry size, followed by Shenzhen with 120 billion yuan and Beijing with 90.7 billion yuan. Hangzhou, capital of eastern Zhejiang province, hit 61.9 billion yuan in revenue.
In 2023, 625 design companies are expected to see their individual sales top 100 million yuan, compared with 566 in the previous year, the report showed. The IC design industry had a total workforce of more than 287,000 people.
