What does China IC industry take to counterattack?

At present, SMIC's most advanced mass production technology falls in the 40nm process, while the world's most advanced foundry technology will step into the 16/14nm process. There is still a long way to go for SMIC's technical strength. Yet, in terms of revenue and size, SMIC is less than 1/10 of the world's top foundries. What are SMIC's advantages, apart from the support of the Chinese government?

Topology view:

1. The rise of China's system factories drives China's IC industry upward

Under the cost advantages, such as in the past, China has become the factory of the world, all kinds of industries such as manufacturing and electronic assembly successively, and under the demand of local market in China, many Chinese brands and system manufacturers, set up the general brand more closely associated with China local suppliers or system manufacturers, under the technology license, prefer local supplier in China, Therefore, the growth and expansion of China's electronic products brands will drive China's IC design industry, and also drive the growth of IC manufacturing industry.

2. The Chinese domestic market will be SMIC's biggest advantage

Currently, Chinese IC design manufacturers have the capability to design 28nm chips, but there is no foundry with pure Chinese background that can produce 28nm chips. As mentioned above, the brand and system manufacturers prefer to choose local suppliers in China under the technology license, when SMIC's 28nm process enters mass production, SMIC will have a better chance of securing orders from Chinese IC design firms than other international foundries.

According to TRI's 2014 global output value statistics of pure foundry fabs, 28nm process is the largest market in the ownership process, accounting for 25.9% of the market, or even 1.6 times that of 40nm process. It is a very large market, and the gross profit margin of general fabs will increase with the mass production of more advanced process. Therefore, in the future, SMIC will be able to further improve revenue and gross margin performance by reliable 28nm process. We understand that the 28nm process of SMIC has not yet entered the process optimization stage, but has entered the risk production stage, and has the capacity of 6,000 wafers per month. It is estimated that there will be an opportunity to start contributing revenue in 2015.

In the future, SMIC not only has the advantage of obtaining orders from Chinese IC design manufacturers, but also has the guarantee of orders from Qualcomm Snapdragon low-order chips. The Chinese market is the main market for Snapdragon low-order chips, which is one of the reasons why SMIC can attract Qualcomm to cooperate with it. SMIC's 28nm process is therefore doubly benefiting from China's domestic market. Topology