What is the current status of integrated circuit development in China?

 The development status of China's integrated circuit industry is as follows:

1. Industrial scale:

• It continues to grow. In the first half of 2024, the output of integrated circuit products increased by 28.9% year-on-year. From 2013 to 2023, the average annual growth rate of integrated circuit output reached 15.01%, and the average annual growth rate of sales reached 17.21%. In 2023, the domestic integrated circuit output reached 351.436 billion pieces, and the sales volume reached 1.22 trillion yuan. The proportion of China's integrated circuit sales in the global market increased from 16.46% in 2013 to 40.4% in 2023.
• The level of localization is constantly improving. In 2013, the ratio of the national integrated circuit production quantity to the import quantity was 32.58%. In the first six months of 2024, this ratio rose to nearly 80%. At the same time, the gap between China's integrated circuit import average price and export average price is showing a narrowing trend, and market competitiveness is enhanced.

2. Industry structure:

• The scale structure of the three core links (design, manufacturing, and packaging and testing) is continuously optimized. In 2023, the sales proportion of the design link reached 44.56%, an increase of 12.32 percentage points compared to 10 years ago, and the compound growth rate in 10 years was 21.07%; the sales proportion of the manufacturing link reached 31.56%, an increase of 7.6 percentage points compared to 10 years ago, and the compound growth rate in 10 years was 20.49%; the sales proportion of the packaging and testing link was 23.88%, a decrease of 19.92 percentage points compared to 10 years ago, and the compound growth rate in 10 years was 10.31%. The design link with higher added value has become the link with the largest proportion.

3. Regional agglomeration:

• Three major clusters have been formed: the Yangtze River Delta with Shanghai as the core, the Pearl River Delta with Shenzhen as the core, and the Beijing-Tianjin-Hebei region with Beijing as the core. The Yangtze River Delta region is the most important integrated circuit development and production base in China. In 2023, the integrated circuit output accounted for about 47% of the national proportion. Jiangsu, Shanghai, Zhejiang, and Anhui rank among the top in the country in terms of integrated circuit output. From the perspective of listed companies, the Yangtze River Delta region has a relatively high proportion of listed companies in various subdivisions of integrated circuit materials, equipment, design, manufacturing, and packaging and testing. The Pearl River Delta region is more prominent in the design link. The Beijing-Tianjin-Hebei region is distinctive in equipment and design. Key cities in other regions are also forming regional characteristic integrated circuit industry clusters.

4. Enterprise development:

• The industrial chain is becoming more and more mature, realizing full-chain coverage from upstream raw materials and equipment to midstream design, manufacturing and packaging and testing, and then to downstream applications. A number of representative enterprises have emerged. For example, in the field of semiconductor materials, there is Shanghai Silicon Industry; in the field of semiconductor equipment, there is NAURA; in the field of integrated circuit design, there are Haiguang Information and Will Semiconductor; in the field of integrated circuit manufacturing, there is Semiconductor Manufacturing International Corporation; in the field of integrated circuit packaging and testing, there are JCET Group, Tongfu Microelectronics, and Huatian Technology.

5. Technological innovation:

• Many achievements have been made in the whole industrial chain links such as design, manufacturing, and packaging and testing. Some high-end products have made breakthroughs and entered the supply chain of global leading companies. For example, in chip design, the design capabilities of some enterprises in specific fields are continuously improving; in manufacturing processes, the gap with international advanced levels is continuously narrowing.

6. Policy support:

• The state has successively introduced a series of policies related to investment tax reductions and government subsidies for integrated circuits to ensure supply chain security and promote the healthy development of the industry. At the local level, they also actively respond. Various localities have introduced relevant policies to promote the development of the local integrated circuit industry, such as clarifying the target of industry development tracks and cultivating enterprises in different levels.

7. Market demand:

• It continues to grow. With the continuous advancement of technologies such as 5G, AI, IoT, VR/AR, and high-performance computing, as well as the development of downstream markets such as automotive electronics and industrial control, it provides a broad space for the integrated circuit industry.

However, China's integrated circuit industry still faces some challenges, such as some key fields still being dominated by overseas manufacturers, there is an urgent need for localized substitution of high-end materials, technological gaps, and a shortage of high-end talents. In the future, it is still necessary to further strengthen technological research and development, talent cultivation, and improve independent innovation capabilities to achieve high-quality development of the integrated circuit industry and enhance competitiveness in the global integrated circuit market.

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