In 2018, the annual growth rate of semiconductor output value was about 5% to 8%, reaching a new high. It is expected to continue to increase in 2019, and the output value will reach the $500 billion mark for the first time. Compared to 2017, the growth rate will slow down, reaching 7.5% in 2018, and will remain stable in 2019-2020. So what will be the development trend of the semiconductor industry? Through market analysis of the semiconductor industry, it is known that with the continuous development of China's economy, the downstream market demand for semiconductors in China has also maintained a rapid development trend.
In 2008, the demand for semiconductors in China was only 103.9 billion US dollars, accounting for a significant portion of the global semiconductor market demand
By 2015, the demand for semiconductors in China had grown to $195.8 billion, accounting for over 60% of the global semiconductor market. At the same time, the import volume of semiconductors has also grown rapidly, mainly due to the rapid growth of imported integrated circuit products. In 2017, China imported 377 billion pieces of integrated circuits, with an import value of up to 260.1 billion US dollars and an export value of 66.9 billion US dollars, but only a quarter of the import value. Integrated circuits surpassed crude oil and became the largest imported product. There is a huge trade deficit in the field of integrated circuits, mainly due to the high demand for semiconductors in China. However, domestic semiconductor companies developed relatively late and have a significant gap in technological level compared to well-known foreign manufacturers.
Under the promotion of the National Integrated Circuit Industry Development Outline and the National Integrated Circuit Industry Investment Fund, the Chinese semiconductor market has become a global growth engine, with sales exceeding 430 billion yuan in 2016 and a growth rate of 19%. Under the pattern of coordinated development of design, manufacturing, and packaging and testing industries in China, it is expected that the growth rate of the domestic semiconductor industry in 2017 will be between 18% and 25%. In the past two years, the amount of international mergers and acquisitions led by Chinese capital has reached 13 billion US dollars, which has attracted the attention of Western advantageous countries such as the United States, and stricter scrutiny has been taken against Chinese corporate mergers and acquisitions. Faced with more severe external challenges, how to integrate existing resources will become a key focus for domestic enterprises in 2017.
Approximately 62 semiconductor wafer fabs are expected to be put into operation between 2017 and 2020, with 26 located in China, accounting for 42% of the global total. It is expected that six of these wafer fabs built in China will be put into operation in 2017. For this production capacity, it is not only a significant increase in the number of manufacturing production lines, but also a focus on advanced process technology. It can be expected that after this round of investment, manufacturers in Chinese Mainland will compete more fiercely with international manufacturers in the field of advanced technology in the future. In addition, in the field of memory, a three legged strategic pattern is currently forming in China, represented by Wuhan Xinxin, Fujian Jinhua, and Hefei Changxin. The industrial layout was initially completed in 2016, and in 2017, with the continuous promotion of the three major projects, breakthroughs are expected in both technology and production line construction.
With the enhancement of comprehensive national strength and the rapid development of the semiconductor industry, China has embarked on a new wave of semiconductor development driven by demand. The overseas investment and merger activities of Chinese capital have aroused the vigilance of countries such as the United States, Europe, Japan, and South Korea. The US Council of Science and Technology Advisors (PCAST) recently released a report stating that the rise of China's semiconductor industry has posed a threat to the United States and will strengthen the scrutiny of Chinese acquisitions by the Committee on Foreign Investment in the United States (CFIUS). Germany and other EU countries have also strengthened foreign investment reviews, especially for mergers and acquisitions by Chinese companies in Europe. The South Korean government supports Samsung Electronics and SK Hynix to lead the establishment of a semiconductor hope fund with a total scale of 200 billion Korean won to cope with the rise of China's memory industry. The global semiconductor industry is facing intensified competition in areas such as capital, technology, talent, and market.
Faced with the increasingly complex international political and M&A environment, on the one hand, it is expected that the trend of domestic capital overseas M&A will slow down in 2017, and the difficulty of M&A will increase. In 2016, the total amount of domestic mergers and acquisitions decreased significantly compared to the same period last year. There were basically no mergers and acquisitions of the entire company, only mergers and acquisitions of foreign company product lines or partial equity. There were 7 cases of review obstruction. With the intensification of global industrial integration and competition, the available M&A targets are gradually decreasing, and the difficulty of domestic capital's overseas M&A continues to increase.
Through a simple analysis of the development trend of the semiconductor industry, it is known that on the other hand, local integrated circuit investment continues to be hot, and there is an increase in various forms of cooperation between domestic and international companies. With the establishment and operation of national funds and the implementation of various policies, local governments have shown great enthusiasm. In the past two years, Beijing, Wuhan, Shanghai, Sichuan and other places have successively established local funds for integrated circuits. The investment heat in the integrated circuit industry by local governments will continue in 2017. Various regions will accelerate investment in projects such as production lines, industrial parks, and public service platforms, and provide relevant policy support. Due to the limitations of the international situation, industrial capital will shift towards mergers and acquisitions of domestic enterprises, and focus on platform enterprises to create an upstream and downstream industrial ecosystem. At the same time, there has been a shift from overseas mergers and acquisitions to various forms of cooperation, such as establishing joint ventures between international and domestic enterprises, and seeking opportunities for high-quality product line overflow mergers and acquisitions after the integration of international giants.