how chinese companies will become semiconductor … · how chinese companies become leaders in...

IBS

© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED. MS-SEMIPRS3.1815 SLIDE 2

INTERNATIONAL BUSINESS STRATEGIES BACKGROUND

Has been in business for over 25 years

Previous experience in managing 1.5K+ engineers at Rockwell International, which included

avionics, communications, and semiconductors. Strong emphasis on communications

Interface with most global leaders in electronics industry, with customers in U.S., Europe, South

Korea, Japan, Taiwan, China, India, etc

Interface and support for major global corporations such as Intel, Qualcomm, Broadcom, Microsoft,

Nokia, Samsung, Sony, Toshiba, Apple, Cisco, Huawei, IBM, Fujitsu, NEC, Hitachi, Renesas,

TSMC, STMicroelectronics, TI, ARM, Cadence, Synopsys, Mentor Graphics, and others

Participated with French Government on their advanced technology initiatives

Interface and support for financial institutions such as Goldman Sachs, Carlyle, Blackstone,

CitiGroup, Warburg Pincus, Walden, KKR, Morgan Stanley, Credit Suisse, BNP Paribas, Bain

Capital, Bank of America, TPG, and others

Involved with advanced technology concepts as well as price-sensitive platforms for smartphone

and other high volume platforms. Also involved with high performance infrastructure companies on

global basis

Strong expertise in China. Latest book is called China’s Globalization (How China Becomes

No. 1). Published business book entitled Chinamerica (McGraw Hill)

Forbes blog contributor, China Daily articles, Global Times editorials, etc

Involved in number of due diligence projects on number of IPOs

Support for strategic initiatives for number of global technology leaders

IBS HAS HIGH MARKET SHARE ON TECHNOLOGY AND STRATEGY BUSINESS

http://www.chinasglobalization.com/






IBS


GLOBAL ELECTRONICS INDUSTRY PRODUCTION

CHINA IS STRENGTHENING RAPIDLY

$1.2T$1.3T

$1.4T$1.4T

$1.5T$1.6T

$1.6T

$1.7T

$1.8T

$1.9T

$2.1T

56.9% 58.5% 60.1% 61.6% 62.9% 64.5% 65.8% 67.1% 68.3% 69.7% 70.6%$0.0B

$0.6B

$1.2B

$1.8B

$2.4B

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Glo

bal E

lectr

onic

s I

ndustr

y P

roduction

China

Other

IBS


SEMICONDUCTOR MARKET BY PRODUCT

$0B

$150B

$300B

$450B

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Sem

iconducotr

Mark

et

MCU

DSP

Standard Cell ASIC

FPGA

Special-Purpose Logic

General-Purpose Logic

Display Driver

Analog

MOS Memory

MPU

Other Semiconductor

IBS


TOP-LEVEL ISSUES IN SEMICONDUCTOR

Market growth will be positive through 2020 but will likely have some volatility

MPU market is dominated by Intel

Windows 10 can strengthen competitive position of ARM 64-bit architecture

MCU vendor base is fragmented

Automotive has many growth areas

NXP-Freescale will be largest vendor

Modem market share leader is Qualcomm

Increased competitive pressure from MediaTek

Analog has many participants

TI is global leader

DRAM market share leader is Samsung

Others are SK Hynix and Micron Technology

NAND Flash market share leader is Samsung

Others are Toshiba, SanDisk, Micron Technology, and SK Hynix

MOST MARKET SEGMENTS ARE DOMINATED BY FOREIGN COMPANIES

ISSUE IS HOW TO CHANGE THIS IN CHINA MARKET

IBS


SUPPLY SEGMENTATION IN CHINA’S SEMICONDUCTOR MARKET

FOREIGN SUPPLY DOMINATES CHINA MARKET

4.5% 6.1% 7.2% 8.1% 8.6% 9.4% 10.2% 11.1% 12.1% 13.2% 14.1%

$128B $132B $136B

$147B

$166B

$181B

$198B

$216B

$233B

$254B

$278B

$0B

$100B

$200B

$300B

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Chin

ese S

em

iconducto

r C

onsum

ption

TOTAL SEMICONDUCTORCONSUMPTION IN

CHINA

Supply from Chinese

Semiconductor

Companies

Supply fromForeign

Semiconductor

Companies

2020 Goal of Chinese

Government

for Supply from Chinese

Semiconductor

Companies

IBS

© 2015 INTERNATIONAL BUSINESS STRATEGIES, INC. ALL RIGHTS RESERVED.

$20B$26B

$32B$41B

$52B$63B

$73B

$84B$94B

$107B

$124B$108B $106B $104B

$107B

$114B

$119B

$125B

$132B

$139B

$147B

$154B

$128B $132B $136B

$147B

$166B

$181B

$198B

$216B

$233B

$254B

$278B

$0B

$100B

$200B

$300B

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Sem

iconducto

r C

onsum

ption in C

hin

a

Consumption by Chinese Companies

Consumption by Foreign Companies

SEMICONDUCTOR CONSUMPTION PATTERN IN CHINA

CHINESE EQUIPMENT COMPANIES ARE INCREASING CONSUMPTION OF SEMICONDUCTORS

MS-SEMIPRS3.1815 SLIDE 7

IBS


STRUCTURE OF CHINA’S ELECTRONICS INDUSTRY MARKET

In 2010, 90.2% of semiconductors consumed in China was for support of foreign electronics

equipment companies

In 2020, 69.8% will be for support of Chinese electronics equipment companies

Historical driver was equipment designed by foreign companies such as Apple, Hewlett-Packard,

Cisco Systems, Sony, and others

Foreign companies were technology leaders

Control of product features and architectures by foreign companies

New situation is where Chinese electronics equipment companies such as Huawei Technologies,

Lenovo Group, Xiaomi, and others are competitive in global markets

Semiconductors continue to be primarily supplied by foreign companies because of their

design expertise and IP

Exceptions are HiSilicon Technologies, Spreadtrum Communications, RDA Microelectronics,

Allwinner Technology, Fuzhou Rockchip Electronics, and Montage Technology

New China is where full supply chain for electronics needs to be in China, including wafers,

packaging and testing, IP creation, product design, and system design

Will need to be systematically implemented because competition is strong

MARKET FORCES AND TOP-LEVEL SUPPORT ARE NEEDED TO BUILD CHINA’S NEW

SEMICONDUCTOR INDUSTRY RAPIDLY

IBS


EXAMPLE OF SMARTPHONE MARKET

2B smartphones in 2020 with $100.00 in semiconductors per smartphone give $200B market

Chinese smartphone vendors are becoming competitive in China and global markets

It is significant that Micromax Informatics (Indian smartphone company) makes most of its

smartphones in China

There are opportunities for power amplifiers, transceivers, modems, application processors,

PMUs, image sensors, ISP, Wi-Fi, Bluetooth, NFC, etc, in smartphones

Important for Chinese semiconductor companies to select product area where there is

ability to compete in global markets as well as China market

Tablet computers have similar characteristics to smartphones, with increased volume by

Chinese companies

Prices, however are very low

Smart UHD televisions will have some similar building blocks as smartphones, including

wireless connectivity

DOCSIS 3.1 will become increasingly important in smart home environment

Smart cards with NFC will also have some common IP with smartphones

Security is high growth area

IMPORTANT TO DEVELOP PRODUCTS WHERE THERE IS HIGH MARKET LEVERAGE

IBS


19 60 148

346

504 644

741 825

913 1,005

1,094

305

440

581

624

636

639

673

711

759

796

829

324

500

729

970

1,140

1,283

1,413

1,536

1,671

1,802

1,923

0

700

1,400

2,100

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Num

ber

of

Sm

art

phones (

MU

)

Non-China

China


SMARTPHONE AND TABLET COMPUTER MARKETS

SMARTPHONE MARKET TABLET COMPUTER MARKET

CHINESE COMPANIES HAVE HIGH GROWTH,

BUT STRONG PRICE PREMIUMS

29

77

131 142 153 164 176

188 202

218

8

42

85

145 135

139 142

146

150

154

159

8

71

162

276 277

292

306

322

338

357

377

0

100

200

300

400

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Num

ber

of

Table

ts (

MU

)

Non-China

China

IBS


UHD TELEVISION MARKET

CHINESE COMPANIES WILL HAVE 50% OF MARKET IN 2017

1 8

27

49

65

89

111

2 10

21

30

36

42

44

47

2

11

29

57

84

107

133

158

0

45

90

135

180

2013 2014 2015 2016 2017 2018 2019 2020

Num

ber

of

UH

DTV

(M

U)

ChineseCompanies

OtherCompanies

IBS


DATA TRAFFIC IN MOBILE PLATFORM

VIDEO IS KEY DRIVER MS-SEMIPRS3.1815 SLIDE 12

3 6 11 19 3663

111

196

341

585

976

0

200

400

600

800

1,000

1,200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Da

ta T

raff

ic (

EB

)

File Sharing

Email

Gaming

M2M

Video

Other

Voice

IBS


IOT DEVICE MARKET

IOT IS ONE OF MARKETS THAT CAN GIVE HIGH GROWTH

$50.0B

$64.0B

$78.6B

$95.6B

$113.8B

$135.1B

$160.0B

$188.8B

$220.1B

$0B

$50B

$100B

$150B

$200B

$250B

2012 2013 2014 2015 2016 2017 2018 2019 2020

IoT

De

vic

es

Automotive

Consumer

Medical

Home

Logistics

Other

IBS


IOT SEMICONDUCTOR AND SENSOR MARKETS

SEMICONDUCTOR AND SENSORS HAVE HIGH GROWTH

$16.6B

$20.2B

$24.3B

$29.3B

$35.0B

$41.8B

$49.8B

$59.1B

$70.0B

$0B

$25B

$50B

$75B

2012 2013 2014 2015 2016 2017 2018 2019 2020

Se

mic

ond

ucto

r a

nd

Se

nso

rs W

ith

in C

lient

IoT

Analog

Processor

Connectivity

Memory

Semiconductor hardware

Sensors

Semiconductor software

IBS


IOT VALUE SEGMENTATION

MULTIPLE LEVELS OF VALUE AND VALUE LEVERAGE

Sensors (2%)

Devices (26%)

Services

(63% of Revenues)

Semiconductors (9%)

IBS


HOW TO WIN

If technology is developed in China, rate of progress will be too slow to compete

in global markets

Cannot close technology gap with leaders

Important to be low cost, which will require low overhead cost as well as low

product cost (small chip area is critical)

Design capabilities are very important

Best approach in gaining access to competitive products is through strategic

partnerships

Successful strategic relationships need to be based on two partners having

common long-term goals…cannot be short term

Important to have business structures that give equitable financial returns

Foreign companies must understand that better financial returns can be obtained

through partnership with Chinese company rather than through establishment of

sales team in China

CONCEPTS OF HOW TO WIN APPLY TO FOREIGN AND CHINESE COMPANIES

IBS


$2.1B

$2.5B$2.6B

$3.0B$3.1B

$3.4B

$3.6B

$3.9B

$4.2B

$4.6B

$5.0B

$0B

$2B

$4B

$6B

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

IP M

ark

et

Memory

Mixed-Signal

RF

Other

Processor


IP MARKET BY PRODUCT

PROCESSOR IS LARGEST CATEGORY AND IS DOMINATED BY ARM

IBS


WHAT NOT TO DO

Have many companies in same market, and all have low market

share

Critical to be one of top two or three vendors

Be focused only on low cost

Important to have some form of technology advantage

Important to have access to financial resources required to develop

next-generation products

Sell to customers that have low market share

Many of these companies will not survive in longer term

Financial stability will be low

Have IP that is not clean

Will be major problem for products that will end up outside of China

CHINA IS MOVING TO ADVANCED TECHNOLOGY STAGE MS-SEMIPRS3.1815 SLIDE 18

IBS


WINNING STRATEGIES: EIGHT GOLDEN RULES

1. Have exit strategy for company

Company that cannot be bought or cannot have IPO will have low value

2. Build strong management team

Having strong CEO is critical

Many companies fail because their management team is weak

3. Ensure access to adequate funding or funding roadmap

Need to develop products for multiple generations

New products must also be better than competitors

Cash management will be critical to long-term success

4. Have good visibility into customer targets

Critical to focus on getting design wins from growing customers

5. Have very strong product development organization

Need fast time-to-market for new products and ability to modify products rapidly


IBS


WINNING STRATEGIES: EIGHT GOLDEN RULES (CONTINUED)

6. Participate in high growth markets where competitive advantage can be

built

Many market segments in China are growing

However, need to ensure that high market share can be built

Most profitable companies are those that are market share leaders

7. Have global perspective on competitors and customers

China market has good growth potential

However, need to ensure that foreign competitors do not take away market

8. Winning philosophy must be in place

Competition is brutal

Need team that is committed to win

Important to be sensitive to competitive threats as well as new opportunities

EXCELLENT GROWTH OPPORTUNITIES IN CHINA MARKET

MANY COMPANIES CAN BE SUCCESSFUL WITH APPROPRIATE STRATEGIES MS-SEMIPRS3.1815 SLIDE 20

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