Chinese Integrated Circuit Designers’ Gross Profits Continue to Decline

Chinese Integrated Circuit Designers’ Gross Profits Continue to Decline

Lai Shasha

Date: Fri, 11/17/2017 - 22:07 / source:Yicai
Chinese Integrated Circuit Designers’ Gross Profits Continue to Decline
Chinese Integrated Circuit Designers’ Gross Profits Continue to Decline

(Yicai Global) Nov. 17 -- The gross profits of China’s integrated circuit (IC) design business have continued to decline, Wei Shaojun, head of the IC design council of the China Semiconductor Industry Association, said at the 2017 Annual Meeting of China IC Design Industry and Beijing IC Industry Innovation and Development Summit.

Although about 603 IC design companies made profits in 2017, an increase of 20 percent over the last year, and the number of companies that did not make a profit decreased 80 percent, the gross profit margin of the industry average for this year was about 28 percent, down from last year’s 30 percent, Wei said.

The industrial concentration and profitability of China’s chip design industry have decreased this year. The sales of the top ten IC design groups accounted for 45.9 percent of the industry total, compared with 46.1 percent last year, Wei said.

The overall strength of China’s chip design industry is still not strong enough, said Wei. Although the sales of the industry this year totaled about USD30 billion, it only took 7.5 percent of the USD400 billion market, he said.

The chip design industry suffers from a talent shortage, and needs 60,000 people or more, considering the time and costs of personnel training, Wei said.

While the ratio of the China’s IC design industry sales to the consumer value rose from 13 percent to 26 percent last year, the microprocessor and memory sectors made little progress, he said.

Creativity in mainstream domestic IC design still has room for improvement. Companies focus too much on specific markets, and lose the determination and courage to compete in the open market, Wei said. This limits their sales to a specific market, which affects product progress, he said.

Such a vicious cycle has largely affected the development of the few high-end chip companies in China, said Wei. "If we do not shift our focus to the 95 percent of the open market, we cannot be the market leader even if we are the best in the 5 percent specific market,” Wei said.

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Keywords: IC Design, Semiconductor Industry, Business Performance