Staff at a laboratory in Shandong province developing a coating material for semiconductors, Nov. 15, 2013. (File photo/Xinhua)
Shanghai, Jiangsu and Shenzhen may follow in Beijing's footsteps to announce a huge investment in the semiconductor industry in the near future, which is estimated to top 100 billion yuan (US$16.5 billion), reports our Chinese-language sister paper Commercial Times.
The Beijing government announced a plan to invest 30 billion yuan (US$4.8 billion) in the industry on Feb. 8, which has raised interest among venture capitalists. Unlike previous government policies, the investments will focus on the core projects of major companies instead of being distributed among different businesses in the industry, said Zhou Shengming, director of Shenzhen Integrated Circuit Design Industrial Center.
According to a report by Chinese thinktank CCID Consulting, the revenue of China's integrated circuit industry this year is likely to grow over 18% and reach 250 billion yuan (US$40 billion) in scale and the IC design industry is likely to see growth in excess of 30%. Other subdivisions of the semiconductor industry could also reach the scale of 81 billion yuan (US$13 billion) with their combined size likely to increase to 32% of the industry.
The change of focus to major companies' core projects is intended to reduce the stalling growth resulting from previous policies, said market analysts.
Under previous policies, many businesses commissioned to conduct R&D have only copied existing products and also gave part of the funds they received to government agencies or individuals to maintain their network of influence. Their research was also hampered by inconsistent taxation and exemption policies across the country.
The integrated circuit industry is knowledge- and technologically intensive and extremely costly. An IC production line can cost up to 10 billion yuan (US$1.65 billion) and its equipment also needs constant upgrades. It normally takes at least five years for IC companies to recover their costs and more time to make a profit.
Zhou Shengming 周生明