China's Increased Investment in Chip-Making Yields Promising Early Results
Li Na
/SOURCE : Yicai
China's Increased Investment in Chip-Making Yields Promising Early Results

(Yicai Global) Aug. 17 -- China's once uncompetitive semiconductor chip industry has been turning up since the government brought in a developer plan for the integrated circuit sector and set up an industry investment fund three years ago.

Chinese chip makers, especially those that manufacture for smartphones, are making their way into the global market. Some 11 Chinese integrated circuit makers ranked among the top 50 last year, compared with just one in 2009, data from market researcher IC Insights shows.

"China has invested heavily in the chip industry and made smooth progress toward its goal of becoming a powerhouse in the sector since it established the fund in 2014," Ding Wenwu, president of China Integrated Circuit Industry Investment Fund Co., said at the Spreadtrum Global Partner Conference on Aug. 15. "We have reason to believe that China will achieve its industry aims."

The sector grew more than 20 percent in China to more than CNY100 billion (USD14.9 billion) last year, he added.

"We put a greater emphasis on low prices three years ago," Li Liyou, chief executive of Spreadtrum Communications Inc., told Yicai Global. "With heavy investment in research and development and technological advances, our company has undergone fundamental changes in recent years. Last year, Spreadtrum invested 40 percent of its income in research and development, which helped us substantially improve our technological capabilities in telecommunications and premium handsets."

A key player in China's chip industry, Spreadtrum benefits from the country's policies and investment. In February 2015, the China Integrated Circuit Industry Investment Fund and the China Development Bank invested CNY30 billion into Spreadtrum's parent company, Tsinghua Unigroup Co. It has since carried out a series of mergers and acquisitions.

Tsinghua Unigroup said two years ago that it will surpass MediaTek Inc. [TPE:2454] within five years to become the world's second largest chip designer in terms of shipment numbers. That goal has not changed, Li said.

"From a product technology perspective, we will shift from a focus on low-end products to those in the mid- and high-end ranges," he added. "The three-dimensional camera solutions we provide can produce effects similar to those of a CNY3,000 (USD448) premium flagship handset.

"In the global premium chip market, people only really know Qualcomm Inc. [NASDAQ:QCOM] and MediaTek," Li said. "But Spreadtrum's research and development is still strong."

The firm has set up a 100-strong team to help speed up development of its 5G technology, and hopes to roll out a chip in the second half of next year in a bid to catch up with Qualcomm's new-generation 5G products.

"Spreadtrum has performed better every year since it went private three years ago. A government official recently approached us and asked if we have any demands, I said we're keen to list on the capital market. He was very supportive," Li added. "We plan to complete an initial public offering on the A-share market next year, given the complex listing procedures in China."

Spreadtrum and Huawei Technologies Co. are China's leading smartphone chip designers. Unlike Huawei's Hisilicon chips, which it uses itself; Spreadtrum's products are mostly sold on to smartphone manufacturers.

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Keywords: Semiconductors , Government Policy , Investment , New Products , Spreadtrum Communications