China's integrated circuit supply capacity is insufficient, but it has ushered in opportunities for development

Since the end of 2016, the gap in the supply of silicon wafers, the most important raw material for integrated circuit manufacturing, has continued to widen, and product prices have risen sharply by 60%. The market is in short supply. However, the supply of local silicon wafers in our country is seriously lacking, and the external dependence on 8-inch and 12-inch wafers is 86% and 100% respectively. Before 2020, China's large-scale new integrated circuit production line will be put into operation one after another. At that time, it will face silicon wafer supply security risks. It is recommended to vigorously cultivate and support domestic silicon wafer companies, increase the supply capacity of domestic silicon wafers, and provide strong support for the development of China's integrated circuit industry.

Supply of silicon wafers exceeds demand, and there is a safety risk in China's IC supply chain

Global silicon supply is monopolized by international giants. The silicon wafer is the most important raw material in the manufacture of integrated circuits, accounting for more than 20% of the total cost of raw materials for integrated circuit manufacturing, and is also an important carrier for guaranteeing the performance of integrated circuits. After years of competition and cooperation, the global silicon wafer market has gradually formed a highly monopolistic development pattern. . Japan's Shin-Etsu, Japan's SUMCO, China Taiwan Universal Wafers, Germany's Siltronic, South Korea's SKSiltron top five suppliers accounted for 92% of the global wafer market. In the 12-inch wafer market where the technical level is more demanding, the top five suppliers have a market share of more than 97%. Among them, China Taiwan Global Wafer Co., Ltd., which was ranked 6th, continuously acquired Danish Topsil Corp. and US-based SunEdison Corp. in 2016, and its market share ranked third, further consolidating its position in the industry. Increased market concentration has also increased the pricing power of silicon manufacturers.

The strong demand for integrated circuit market drove the price of silicon wafers to rise sharply. Driven by the application market of the Internet of Things, data center servers, and mobile phones, in 2016, the global integrated circuit market recovered positively. The Global Semiconductor Trade Association (WSTS) predicts that the growth rate of the global integrated circuit market in 2017 will reach 19.1%. Leading companies such as Intel, Samsung and Taiwan Semiconductor Manufacturing Co., Ltd. have announced plans for large-scale production expansion. New production lines such as SMIC and Changjiang Storage have started construction. The strong market demand makes wafer prices continue to rise since the end of 2016. The latest signing price of Japan's SUMCO company's 12-inch silicon wafer has reached 120 US dollars per piece, which is a 60% increase from the end of 2016. Since silicon wafer companies have not expanded their production capacity for many years, the global silicon wafer supply gap is expected to reach 5% in 2017 and will exceed 10% in 2019.

China's integrated circuit industry is facing the risk of being broken off by overseas wafer companies. The global silicon market is in short supply. Leading integrated circuit companies such as Samsung and TSMC have tended to sign long-term supply agreements with silicon wafer companies to lock in supply of silicon wafers and ensure that plans for future expansion will not be affected. The rapid development of China's integrated circuit industry has just begun, and mainland integrated circuit manufacturing companies have weak bargaining power over upstream raw material companies. As the global silicon supply gap continues to increase, overseas silicon wafer suppliers are likely to give priority to the supply of leading companies such as TSMC, Samsung, and even to the supply of Chinese companies in order to ensure the supply of leading enterprises. However, mainland silicon wafer companies still do not have 12-inch silicon wafer supply capacity, 8-inch silicon wafer production capacity is very low, and the degree of external dependence of 86% or more, making China's planned construction of integrated circuit production lines are facing off-supply risk.

China's silicon wafer supply capacity is insufficient, but it has ushered in opportunities for development

The technology of mainland silicon wafer companies is backward, and the synergy effect between upstream and downstream is weak. It is difficult to support the development needs of the integrated circuit industry in the short term. First, mainland enterprises are not yet mastering the 12-inch wafer manufacturing technology used in advanced process technology, and only mastering 8-inch, 6-inch and other small and medium-sized silicon wafer manufacturing technologies. As the overseas technologically advanced silicon wafer equipment companies and silicon wafer leading enterprises have formed close cooperative R&D relations and signed a technical confidentiality agreement, the customized equipment for cooperation and development between the two can not be sold to China's wafer companies, and China can only purchase them. To general equipment that has not been optimized. As a result, China's silicon wafer companies need to re-develop technology, and the technological development progress has always been lagging behind. Second, there is no good coordination mechanism between the supporting companies, silicon wafer companies, and integrated circuit manufacturing companies. Silicon wafers are a fully competitive market, and the cost and performance of silicon wafers determine the purchasing options for downstream production lines. The electronic grade polycrystalline silicon raw materials, single crystal furnace equipment, graphite crucibles, grinding machines, polishing machines, polishing cloths, and wafer cassettes required for the production of mainland China silicon wafers all need to be imported, making the cost price of domestic silicon wafers exceed the market price of 20 %, lack of competitiveness in the market, it is difficult to enter the supply chain of integrated circuit manufacturing companies, it is difficult to break the supply pattern of the silicon market.

The development of domestic silicon wafers has ushered in the golden window period. First, the progress of global silicon wafer technology has been almost suspended, and we have been fighting for time to catch up. At present, the global integrated circuit manufacturing line has been suspended from the 18-inch upgrade. Leading companies plan to build 12-inch advanced process production lines. At this stage, the economic benefits of an 18-inch line are no better than 12 inches. Leading companies such as Intel and Taiwan Semiconductor Manufacturing Co., Ltd. are conservative about the 18-inch production line and expect to start construction at least until 2023. The suspension of the 18-inch production line has been time-consuming for our silicon manufacturing technology research and development. Second, the mainland has vigorously built integrated circuit manufacturing production lines and provided a market for domestic silicon wafers. The mainland is accelerating the layout of integrated circuit production lines. By the end of 2016, there were 11 12-inch production lines and 13 under construction. According to the statistics of the CCID think tank, in 2016, the production capacity of 12-inch integrated circuits in China's mainland has already accounted for 9.5% of the world's total, and the demand for 12-inch wafers is 500,000 per month, and it will reach 1.2 million per month in the next five years. 8 The demand for inch silicon wafers is 700,000 wafers/month. Third, the country's "big funds" have begun to lay out the silicon wafer industry and inject capital into the industry. Major Funds and Shanghai Guosheng, etc., jointly established Silicon Industry Group, and controlled Shanghai Xinsheng and Shanghai Xinao, acquired Finnish Okmetic, and acquired shares in French Soitec. Xinsheng has invested in the construction of a 12-inch wafer factory and plans to have a capacity of 600,000/month in 2021. "Large Fund" and Jiangsu Zhongneng jointly established Xinhua Semiconductor Co., Ltd. to lay out electronic grade polysilicon and upgrade the supply capacity of silicon raw materials in the mainland.

Some Considerations on Improving China's Silicon Wafer Supply Ability

The first is to continue to support technology research and development through major special funds. Focus on supporting the development of electronic grade polysilicon, silicon single crystal preparation, cutting and polishing process, silicon wafer equipment development, and auxiliary material preparation key technologies to break through core technologies as soon as possible. Accelerate the transformation and industrialization of technology, increase the production capacity of silicon wafer companies, reduce the pressure on R&D costs, and increase the market competitiveness of domestic silicon wafers.

The second is the acquisition of capital and the internal integration of capital. By using strategic investment funds such as “big funds” as capital bonds, the company will acquire silicon wafers, equipment manufacturing and supporting companies that have technology but lack market development capabilities, and quickly increase the overall strength of the domestic wafer industry. Through fund-holding methods, the integration of wafer companies in mainland China will be promoted. Adopt the model of establishing a platform company to enhance the competitiveness of mainland companies in the global market.

The third is to support mutual verification between the mainland's integrated circuits, silicon wafers and supporting enterprises. Support silicon wafer companies, integrated circuit manufacturing companies, and pilot production lines to cooperate in the R&D and verification of domestic silicon wafers. The use of "first batch" domestic silicon wafers for production lines and silicon wafers for "first batches" of electronic grade polysilicon and other products have given preferential policy support. Increase premium subsidies or establish insurance funds for the application of domestic integrated circuit materials to reduce the risk of integrated circuit companies using domestically produced silicon wafers and increase the confidence of downstream users.

The fourth is to guide the wafer industry to conduct a reasonable regional layout. We will give full play to the advantages of rich energy resources in the central and western regions of China, and guide the implementation of a reasonable regional layout to enhance the competitiveness of silicon wafer companies. It is suggested that the silicon single crystal fabrication process with high degree of automation and large energy use be located in areas with low energy costs in the central and western regions; silicon wafer cutting and polishing, testing, and technology research and development are closely related to integrated circuit production lines, and priority should be given to integrated circuits. The production lines gather in Beijing, Fuzhou, Xiamen, Quanzhou, Yangtze River Delta and other cities and regions.