Where is the 100 billion national chip giant?

The largest reform in the history of China's integrated circuit industry has begun, and a total of about 125 billion yuan worth of state-level industrial investment funds will soon be launched.

The author was informed from various sources that the preparatory group for the National Integrated Circuit Industrial Investment Fund (hereinafter referred to as the “large fund”) was set up in the Ministry of Industry and Information Technology and led by Zhou Zixue, Chief Economist of the Ministry of Industry and Information Technology. The fund company may complete the capital injection at the end of October, and has previously established a fund management company.

At the same time, the docking of major funds and industrial chains has started spontaneously. Beijing, Shanghai, Shenzhen, Wuhan, Chengdu, Xi'an, Hefei and other areas of distribution of China's integrated circuits industry are starting local integrated circuit fund projects. IC companies have emerged from mergers and acquisitions with Ziguang Group, CEC (China Electronics and Information Industry Group), and Datang Telecom. These local governments and companies have begun to try to connect with national policies in order to seize the opportunities in this round of industrial changes.

On the afternoon of September 16, the author interviewed the Ministry of Industry and Information Technology Software and Integrated Circuit Promotion Center exclusively. Zhou Meng, the deputy director of the integrated circuit division of the center, revealed that the major foundations are mainly invested in large companies with strong strengths, and the landing forms of large funds will be more market-oriented, including the fund companies will set up projects, and then go to docking with chip companies. Negotiate the project and set up an exit mechanism for the fund so that the fund can roll over.

Which link should you go to?

The integrated circuit industry is divided into three phases: design, manufacturing, and packaging testing. And where should the big fund go? This is the most concerned and most controversial topic in the current chip industry chain.

Zhou Meng told reporters in an interview with reporters that at present, in the three fields of design, manufacturing, and packaging and testing, China’s output value accounts for approximately 32%, 24%, and 44%. In 2013, the proportion of design, manufacture, and packaging testing of the world's integrated circuit industry was 25.6%, 58.2%, and 16.2%. Zhou Meng believes that the design industry has made relatively big breakthroughs, and the manufacturing industry is very backward.

"China's chip manufacturing is lagging behind the mainstream level of two generations of technology." Zhou Meng said: "The domestic is mainly 45nm technology, China's largest chip manufacturing company SMIC 28nm process has just matured, but Intel, Samsung, TSMC 28nm already It matured and began to try 16nm and 14nm processes."

"The most fundamental reason for the gap lies in capital investment." Zhou Meng pointed out that in 2012, Intel, Samsung's capital expenditure on chip technology is about 8 billion - 12 billion US dollars, in addition to about 10 billion US dollars in R & D investment; and TSMC The sum of capital expenditures and R&D expenditures also exceeded US$10 billion. However, "the sum of SMIC's capital expenditure and R&D investment last year was about 600 million U.S. dollars."

A 28nm production line requires approximately RMB 20 billion in funds, and the annual maintenance fee is approximately RMB 1 billion. "This is a capital-intensive industry. The domestic manufacturing industry chain cannot rely on its own weak financial resources to support large-scale investment, and it is difficult to seek help in the capital market. It can only rely on the support of the state fund." Zhou Meng said: "For manufacturing Enterprises and state funds are willing to play the role of a low-cost financing institution.

According to Gu Wenjun, chief analyst of iSuppli Semiconductor, "Investment in manufacturing is also conducive to the exit mechanism of major funds." He disclosed: "The national promotion program has been made clear, and funds are mainly invested in the manufacturing industry, accounting for about 60%."

“The state should give more support to designing enterprises, designing talents for enterprises, and R&D expenditures have always been a major issue for the development of enterprises.” The relevant persons of Ziguang Group have different opinions. The Ziguang Group, which has acquired Spreadtrum and RDA, plans to establish the largest chip design company in China.

This person thinks: "20 billion may not be able to develop a high-tech production line, but enough to support 10 design companies." It is understood that Spreadtrum more than 2,000 teams monthly research and development funding of about 200 million yuan. In 2013, Spreadtrum’s revenue was 6.4 billion yuan, and 20-25% of its revenue was used for research and development.

When interviewed by the media, Cao Bin, chairman of Datang Telecom, once stated: “The state can consider increasing the support for domestic chip design companies. At the same time, it will change the way of supporting the purchase of equipment and IP and increase the manual investment in design enterprises. Support."

Datang Telecom has integrated its core technology, Datang Microelectronics, Datang Semiconductor Design Co., Ltd., at the same time, Datang Telecom also shares SMIC, its chip platform design, manufacture in one.

How to fill 4G fault?

In fact, for China's chip design companies, the fault crisis of 4G chips is imminent.

Huawei Hass, Spreadtrum, and RDA, the top three Chinese chip design companies with 2013 revenues, benefited from China's TD-SCDMA. Entering the 4G market, the situation has turned sharply.

In early 2009, China Mobile, which obtained a TD-SCDMA license, began to raise the banner of China’s own technology and supported the TD-SCDMA industry chain. At that time, chip giants such as Qualcomm and MediaTek were not optimistic about TD-SCDMA technology that was only used commercially in China, and its products were focused on WCDMA, a 3G standard that was commercially used worldwide.

After 3G commercialization, China Mobile purchases tens of millions of TD-SCDMA mobile phones each year for the purpose of developing 3G users, and provides a large amount of terminal subsidies. In 2012 and 2013, China Mobile has sold 56 million TD-SCDMA mobile phones and 150 million mobile phones respectively.

In this market without giants, Chinese chip design companies have been able to rise rapidly. In 2011, Spreadtrum introduced its SC8800G, a 40nm chip that significantly exceeds the industry level, winning 50% of TD-SCDMA market share, and has dominated the market since then.

However, the good times are not long. After commercial use of LTE, China Mobile announced in early 2014: “In 2014, we plan to sell 1.9-2.2 million terminals and LTE terminals will cost hundreds of millions. In 2014, TD-SCDMA and TD-LTE terminals were equally important. In 2015, we reduced the number of TD-SCDMA. "In the middle of 2014, after China Mobile stopped the subsidies for TD-SCDMA terminals, this process was accelerated in disguise.

The market is rapidly turning to 4G. Qualcomm launched the 4G mobile phone chip required by China Mobile in 2012, and MediaTek followed suit. However, China's chip companies failed to keep up to date. Until this year, Huawei Hassian released 4G five-mode chips, but it was used only by Huawei and was not supplied to the market. Spreadtrum and Lianxun also released 4G chips this year, but it is not a five-module required by China Mobile.

Recently, Chairman of China Mobile Kuang Guohua announced that the number of TD-LTE base stations has been expanded from the original plan of 500,000 to 700,000. China Mobile is accelerating the transition from 3G to 4G, leaving the window period for domestic chip design companies rapidly compressed.

It is worth noting that, in the transition from the 3G to the 4G era, ST-Ericsson, the internationally renowned chip design company, was disintegrated, and Japan’s Renesas and Broadcom closed the mobile phone chip business. In the face of Qualcomm and MediaTek, they also had to leave.

"With Qualcomm monopolizing the high-end market of 4G chips and MediaTek winning the mid-to-low-end structure, the domestic design companies that have broken the file have been worrying in the 4G era," said Zhou Meng.

How to support patents?

There are many obstacles between domestic chip design companies and MediaTek and Qualcomm, among which the patent reserve problem is the most difficult to crack.

In a proposal made by the domestic chip design company to the Beijing Municipal Government, the company proposed a proposal for patent reserve problems: "The government provides tax support for design companies to purchase intellectual property and software, encourages enterprises to purchase intellectual property rights, and supports registration of overseas patents. Application; In addition, it is recommended that the government establish an intellectual property working group, an intellectual property risk fund, and a professional intellectual property lawyer team."

According to the reporter's understanding, the Ministry of Industry and Information Technology and Integrated Circuit Promotion Center both have a "patent defense library." However, at present, the IP library mainly assembles domestic patents, and it is difficult for overseas patent resistance to play an effective role.

In China's 2000 and 2011 successively issued "Several Policies to Encourage the Development of the Software Industry and the Integrated Circuit Industry" and "Several Policies to Further Encourage the Development of the Software Industry and the Integrated Circuit Industry," IPR policies have been proposed and released by the Ministry of Industry and Information Technology. "The Outline of the National IC Industry Development Promotion" once again puts forward: "Strengthen the use and protection of integrated circuit intellectual property, establish a national major project intellectual property risk management system, guide the establishment of intellectual property strategic alliances, and actively explore direct financing related to intellectual property rights Method and asset management system."

However, so far, both chip design companies and national policies have failed to make significant achievements in the field of intellectual property. A senior engineer of China Telecom explained to reporters: “The fund should invest more in the intellectual property field. If Chinese chip companies want to go to the international market, they cannot bypass the patent.”

“The acquisition of foreign companies is currently the most effective intellectual property solution.” Zhou Meng told reporters. In August 2014, Qingxin Huachuang issued a tender offer to U.S. imaging chipmaker OmniVision Technologies. Qingxin Huachuang is the management unit of the design and packaging test fund in the Beijing IC Industry Fund.

In addition, Chinese chip companies can also make up for the shortcomings of high-end talents through mergers and acquisitions. "Moreover, it is also possible to set up companies overseas, recruit overseas talents to engage in chip design R&D, and then translate the results into China." Zhou Meng said