Shanghai: the new Silicon Valley? A booming electronics industry creates IC demand.

China represents a growing electronics market--a target market for companies around the globe. While many countries suffered a decline in the electronics sector in 2001, China saw a 16 percent growth rate. The electronics market in China is expected to grow from $122 billion in 2001 to $366 billion in 2010, according to the Shanghai IC Industry Association. China already ranks as the world's largest producer of color TVs, VCRs, DVD recorders, refrigerators, air conditioners and mobile phones. Mobile handset production is estimated to be 90 million units per year and will continue to grow. Given the growth in the electronics industry, will Shanghai--with its many wafer fabrication facilities--become the new Silicon Valley?

Stage of the IC Market in Shanghai

China's integrated circuit (IC) market currently shows a 30 percent growth rate. Seven wafer fabrication facilities are currently headquartered in Shanghai:

Advanced Semiconductor Manufacturing Corp. of Shanghai (ASMC); Shanghai SIM-BCD Semiconductor Manufacturing Corp.; Shanghai Hua Hong NEC Electronics; Semiconductor Manufacturing International Corp. (SMIC); Grace Semiconductor Manufacturing Corp. (GSMC); and two facilities of Shanghai Belling. Motorola's Tianjin facility is not far away. Two of the seven Shanghai facilities have 8-in. wafers with 0.25-micron process technology, three facilities feature 6-in. lines with 0.6- to 1.0-micron technology, one facility has a 5-in. line with 1.2-micron feature size and another facility has a 4-in. line with 1.2-micron technology.

Today, 90 percent of the output of these wafer fabrication facilities is for export. If China is to expand the electronics industry significantly, the IC industry must grow domestically--a revelation not entirely lost on Shanghai's government officials. China started a research and development program in 1965 and has made much progress over the years. With a growth rate of 30 percent in the IC market and at least 10 wafer fabrication facilities scheduled to be built by 2005, China's IC industry is booming. Taiwan Semiconductor Manufacturing Co. (TSMC, Hsinchu, Taiwan) has announced plans for a wafer fabrication facility in Shanghai, and other companies are expected to follow. Major IC fabrication equipment makers view Shanghai as a dynamic market that is expected to grow rapidly over the next few decades.

Other Areas of Interest

Not only are wafer fabrications a requirement, but the rest of the infrastructure that goes with the industry is also a must. China claims 22 material and equipment companies, and additional companies are considering expanding operations in the growing market. Applied Materials (Santa Clara, CA) expects to see two wafer fabrications, per year, constructed in China this decade and aims to push sales in the China market from $100 million in 2000 to $1 billion in 20051. While China boasts 100 design houses and 50 assembly and test facilities, at present, only a few can be considered advanced technologies. Today's IC design houses include Intel, Epson, Lattice, Trident, ISSI, VIA, Pericom, TES and Avanti. Additional companies are expected to establish design centers in the future and more.

Companies that assemble ICs into packages are also a key part of the infrastructure, and many are located in Shanghai. Featuring advanced capability in the Shanghai area, Intel assembles flip chip, plastic ball grid array (BGA) and various chip-scale packages (CSPs). Established IC assembly subcontractor service providers, such as Amkor and ChipPAC, are expanding Shanghai operations and will offer an increasing number of BGA and CSP assembly options.

Alliances between Shanghai foundries and IC assembly houses are also being formed. Amkor and GSMC recently signed an alliance in which Amkor will provide assembly services for the foundry. New sub contract assembly operations, using advanced assembly technology, are also emerging in Shanghai. Global Advanced Packaging Technology (GAPT) offers package design, assembly and final test services and is focused on advanced packages such as BGAs, CSPs and high-end lead frame packages. Platronics has established a test facility and plans to add assembly capability. Taiwanese subcontractors, such as Advanced Semiconductor Engineering, Inc. (ASE), have facilities under construction, and ChipMOS has announced construction plans.

An Added Bonus

While many companies selected manufacturing sites in China to take advantage of cheap labor, these companies have also found an abundant supply of talented engineers with a hunger for knowledge. This quest for knowledge is being clearly demonstrated at seminars, workshops and conferences held in Shanghai. With presentations focused on the infrastructure development for advanced packaging, the recently formed Advanced Packaging and Interconnect Alliance (APiA) (2) held an advanced packaging seminar in Shanghai in March 2002. Speakers provided the latest information on advanced equipment and materials for packaging at the wafer level. The level of audience participation, and understanding of the issues based on a question-and-answer discussion, exemplifies the engineering talent of local employees and provides a glimpse of the thirst for knowledge in advanced packaging and assembly that will surely be met by a quest for information and new technology.

Conclusion

The key to future growth of the industry will be infrastructure growth and the continued transfer of technology. Many issues must be resolved--including respect for intellectual property, U.S. export control limitations and restrictions on Taiwanese companies investing in China. Given the level of investment, and the amount of capital spending, the semiconductor industry in Shanghai is off to a great start to become the Silicon Valley of the Far East.

Reference

(1) Semiconductor Business News, March 22, 2002.

(2.) APiA is an alliance of companies targeted at accelerating the development of the infrastructure for advanced packaging solutions. For more information, visit www.apialliance.com.

E. Jan Vardaman is president of TechSearch International, Austin, TX; e-mail: [e-mail].