China will fall far short of its targets for expanding its semiconductor industry, but the year ahead in chips looks good, a veteran analyst said.
SUNNYVALE, Calif. — China’s ambitious drive to expand its semiconductor industry will fall far short of its targets, according to Bill McClean, president of IC Insights. In the short term, 2018 will be a good year for the global chip industry, despite the ups and downs of the DRAM market and capital spending, he said.
China will fill 15 percent of its semiconductor needs in 2020 and perhaps 20 percent in 2022, McClean predicts. That’s significant growth, but far from the targets of 40 percent in 2020 and 70 percent in 2022 that the China government has set.
The goals are “just ludicrous…China taking over the rest of the world in IC production is not happening,” McClean said at an annual talk here.
The country has pledged as much as $120 billion to fund its chip industry, in part because it spends more on importing semiconductors than on oil. But McClean expects only about 10 percent of those funds will be spent over the next three years on capital equipment.
He pegged China IC production in 2022 at $33.6 billion, 7.2 percent of the worldwide total, up from five percent last year. “Even with some upside, China will still make less than 10 percent of the world’s production by 2022…I could see China getting 10 percent of the DRAM market, but not taking big chunks out of Micron, Samsung and SK Hynix,” he said.
McClean believes Samsung’s decision to spend $26 billion on capex last year — more than twice its average — was motivated largely by China’s ambitions. “They are firing the first shot against the China companies. They want to get so much capacity it will shut them down immediately,” he said.
Samsung’s capex investment, announced last fall, is more than Intel and TSMC spent on capex combined. “It was one of the most amazing things I’ve seen in the industry,” said McClean who started his career as an analyst 38 years ago.
“Maybe I’m too skeptical. Some say China will do what it did in steel and other industries, but chips are not the same thing — 18nm DRAM technology is not easy to master,” he said.