[Peace&Chips] China's Fabless Firms Strengthen Semiconductor Rise

China Ranks 3rd in Global Fabless Market
Number of Chinese Fabless Companies Increased 4.1 Times in 7 Years
Strengthening Design Capabilities by Increasing Patent Applications

Editor's NoteSemiconductors, known as the rice of modern industry. Although it's a term we hear every day, it's often hard to explain. Peace & Chips will make the complex concepts and overall trends of the semiconductor industry easy to digest for you. Just bring your spoon.

Chinese company Huawei recently released the latest 5th generation mobile communication (5G) smartphone equipped with advanced semiconductors, and related news has been nonstop. This smartphone includes a 7-nanometer (nm; 1 nm is one billionth of a meter) processor designed by 'HiSilicon,' a fabless (semiconductor design) company established by Huawei. The industry inside and outside is focusing on how this processor was manufactured and integrated.

In fact, China is somewhat a leading country in the fabless sector. Of course, the United States holds 68% of the global fabless market (as of 2021), so Taiwan (21%) and China (9%), ranked second and third, do not have large shares. Narrowing down to the Asia-Pacific region, China's share last year was 22%, second only to Taiwan's 73%. Five Chinese companies, including Willsemi and UniSOC, were listed among the top 10 fabless companies.

The industry believes that since China began seriously fostering the semiconductor industry in the 2000s, the local fabless market size has rapidly increased. The Korea Institute for International Economic Policy (KIEP) explained in a June report analyzing China's semiconductor industry that "the number of fabless companies in China increased 4.1 times from 681 in 2014 to 2,810 in 2021" over seven years. During the same period, sales also grew 4.3 times, reaching 451.9 billion yuan in 2021.

KIEP also stated that "(in China) investment in chip design, a field where U.S. semiconductor sanctions against China are relatively less severe, is increasing." This suggests that China is strategically investing in the fabless sector as part of its semiconductor rise. They also noted that some fabless companies are standing out by enhancing their advanced semiconductor design competitiveness.

In fact, Jensen Huang, CEO of NVIDIA, attended an IT event in Taiwan in May and pointed out, "There are many GPU startups in China," adding, "They should not be underestimated." This implied that U.S. restrictions on exporting advanced GPUs to China would ultimately help China's GPU self-reliance. Several fabless companies in China, such as Biren Technology, Innosilicon, and VeriSilicon, are reportedly focusing on GPU technology development.

The industry views that despite these efforts, it is not easy for China to catch up with the U.S. technology level. However, since the unavoidable hegemonic competition with the U.S. is unfolding in the semiconductor field, there are opinions that China could achieve results in the long term. The more China focuses on localization, the more fabless companies like HiSilicon could gain business opportunities. China's recent surge in patent applications and accumulation of design capabilities are also factors to watch in the future.

This article is from [Peace & Chips], published weekly by Asia Economy. Click subscribe to receive articles for free.

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