The integrated circuit (IC) industry is a basic and leading industry that bolsters economic and social development and protects national security, as well as a key driver to the digital economy and new infrastructure development in new times. As the political center and financial center of China, Beijing and Shanghai, respectively, develop the IC industry in their own way in response to the 14th Five-Year Plan outlined by the central government. In this article, we will compare the status quo, size, spatial layout, investment, policies and plans of the IC industry in two cities.
Status Quo
Beijing was among the first places in China to develop ICs and has been a technological innovation hub in the IC industry at all times, and more importantly, a hub of sci-tech resources. During the "13th Five-Year Plan" period, Beijing’s IC manufacturing industry maintained a strong compound annual growth rate (CAGR) of 28.1%, outperforming the countrywide average for the same period. In the meantime, it is plagued by demotivation, inactive innovation by SMEs, and weak synergy in regional development, among other problems.
Shanghai boasts the most well-developed and vibrant IC industry in China and enjoys leading technologies across the industrial chain, including design, manufacturing, packaging and test, equipment and materials. Shanghai's IC industry is also more structurally balanced. In particular, the design sector's sales revenue as a percentage of that of the whole IC industry rose to 47% in 2021 from 32% in 2015. The city is home to many high-quality companies. Meanwhile, some weaknesses in the IC industry in Shanghai are noteworthy. First, although Shanghai's IC industry represents the highest level in China, more than 90% of chips used in the manufacturing sector of China are imported and some core technologies are under the control of others. Second, there is a shortage of IC professionals, especially leaders and top-notch talents. Finally, Shanghai has a number of IC industrial parks, like Zhangjiang Hi-Tech Park, Caohejing Development Zone, Songjiang Development Zone. Their layouts and incentives are quite similar, and the synergistic effect is limited.
Size of the industry
According to Beijing Municipal Bureau of Statistics and some publicly available data, the size of Beijing's IC industry grew from more than 60 billion yuan in 2015 to over 115 billion yuan in 2021, with a CAGR of 11.2%, accounting for about 11% of the total of the country. According to data released by the National Bureau of Statistics, in 2021, Beijing's IC production, 20.78 billion pieces, took up 5.8% of the total production of China, 359.43 billion pieces. However, in terms of the number of enterprises, there is still a gap between Beijing and the Yangtze River Delta and the Pearl River Delta. As of the end of 2021, the number of Beijing-based IC enterprises was only equal to 1% of the country’s total.
Shanghai's IC industry is the largest in size. According to data from Shanghai Integrated Circuit Industry Association, in 2021, Shanghai's IC industry reported total operating revenue of 257.885 billion yuan, an increase of 24.50% year-on-year, marking the eighth year with a double-digit growth consecutively since 2014, and an all-time high. As of the end of 2021, there were 17,457 IC-related enterprises in Shanghai, a 104.80% surge year-on-year, and the number represented 5.21% of the total number in the country. Among them, more than 1,000 are key enterprises, which employ 40% of the country’s IC talent pool. In 2021, sales of China's IC industry exceeded one trillion yuan for the first time to hit 1045.83 billion yuan. According to the statistical caliber of China Semiconductor Industry Association, sales of the design, manufacturing, and packaging & test sectors combined in Shanghai totaled 228.902 billion yuan, and Shanghai had a 21.9%, more than one-fifth, share of the IC industry countywide.
Spacial layout
Beijing has shaped an IC industrial cluster with Haidian, Daxing & Yizhuang and Shunyi as the pivots over these years. The IC design sector is concentrated in north Haidian district, with Zhongguancun IC design park as the pivot, and the IC manufacturing sector in Yizhuang with Beijing Economic-Technological Development Area, Daxing and Shunyi as the pivots. In addition to the said three areas, Pinggu, Chaoyang, Tongzhou, and Changping are also actively responding to Beijing's call for encouraging IC development and fostering IC industrial clusters.
Shanghai's IC industry unfolds a spatial layout characterized by "one core plus multiple poles, one main body plus two wings". As to "one core plus multiple poles", Zhangjiang Hi-Tech Park is the core, while multiple poles are Jiading, Lin-gang, Yangpu, Caohejing Development Zone, Songjiang Economic Development Zone, Qingpu and Jinshan; as to "one main body plus two wings", Zhangjiang is the main body, while Lin-gang and Jiading are two wings. The general development plan is to ramp up the energy level of Zhangjiang state IC industry base, enhance the high-end IC equipment manufacturing capacity of the Lin-gang Special Area, and nurture the IC emerging industrial belt of Jiading.
Industrial Investment
As a capital-/technology-intensive industry, the R&D and production of ICs require enormous investment, and the participation of social capital is essential.
Beijing established IC industrial investment funds worth 30 billion yuan in total back in 2014. The FOF (Fund of Funds) (1+N) model was adopted to launch one parent fund plus N sub-funds. The parent fund was founded by Zhongguancun Development Group, by adopting a corporate system, and its 9-billion-yuan fund was contributed by the government fully. At present, the fund mainly invests in two sub-funds: manufacturing and equipment, design and packaging & test.
Shanghai launched the Shanghai IC Industry Fund in 2016, worth 50 billion yuan in total. In addition, Shanghai has hundreds of privately operated funds investing in ICs, making it the most active region in China in terms of IC industry investment and financing. According to data from Shanghai Investment Promotion and Service Center, as of the end of 2021, there were 59 Shanghai-listed companies, including 29 IC-related ones. This suggests that Shanghai's well-developed sci-tech finance has provided strong support for the IC industry and the effort is paying off.
Policies and Plans
According to the Development Plan of Beijing's Sophisticated Industries During the 14th Five-year Plan Period issued by the Beijing municipal government, Beijing will emphasize self-developed breakthroughs and collaborative development of ICs, build an innovation hub of IC design, manufacturing, equipment and materials, concentrate on Beijing Economic-Technological Development Area, Haidian and Shunyi, and strive to achieve 300-billion-yuan operating revenue of the IC industry by 2025.
Beijing's plan is summarized as follows. First, regarding IC innovation platforms, it will build a state IC innovation platform; support the R&D and verification of basic frontier technologies in major strategic fields such as novel memory, CPUs, high-end image sensors, etc., in a bid to shape a full-fledged intellectual property system. Second, regarding IC design, it will concentrate on Haidian and seek breakthroughs in the R&D and industrialization of high-performance CPU, FGPA (Field Programmable Gate Array), DSP (Digital Signal Processing) and other general-purpose chips and EDA tools (electronic design automation tools) that are made in China and used widely and in large quantities. Third, regarding IC manufacturing, it will adhere to the principle of concentration on the main body and regional cluster, and support Beijing Economic-Technological Development Area and Shunyi to build advanced and signature processes, Micro-Electrical-Mechanical processes and compound semiconductor manufacturing processes, among other production lines. Fourth, regarding IC equipment, it will support the construction of Beijing Integrated Circuit Equipment Industrial Park at Beijing Economic-Technological Development Area, to build the world's leading process equipment platform enterprises and an industrial cluster of technically advanced core components of lithography machine and equipment parts.
According to the 14th Five-year Plan for the Development of Strategic Emerging Industries and Leading Industries unveiled by the Shanghai municipal government, Shanghai will align the development of the IC industry with major strategic tasks of the country and ramp up the energy level and comprehensive strengths of the industry continually. During the 14th Five-year Plan period, the IC industry will pursue a CAGR of about 20%, and endeavor to have two enterprises in the manufacturing sector steadily ranking top globally in terms of revenue and nurture a number of listed companies in design, and equipment & materials. By 2025, a globally influential IC innovation hub will be built, more core equipment and key materials will be made in China, and an independent and controllable industrial system will take shape.
At the end of 2021, the Shanghai municipal government released Several Policies to Boost High-quality Development of Shanghai's Integrated Circuit Industry and Software Industry in New Times. Key messages therein are summarized as follows. First, talent is the most important asset. Second, it will attach more importance to policy continuity and concerted support, and step up support for the IC and software industries. Third, it will prioritize key links of the industrial chain, such as IC production, equipment, materials, EDA and other basic fields such as basic software, industrial software, software for emerging technologies. Finally, the new policy underscores collaboration and alignment across the Yangtze River Delta, in support of the synergistic development of the industrial chain in the region.
Conclusion
To sum up, China's IC industry is facing huge opportunities and grave challenges at the same time. Beijing and Shanghai, as the two pace-setting cities, are accelerating transformation and upgrading of the IC industry, in an effort to deliver on the development goals set in the 14th Five-Year Plan and add fuel to IC development in the country.
References:
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