Foreign companies (e.g., Samsung, SK Hynix, TSMC, etc.) are expected continue to comprise more than 50% of IC production in China through 2026

IC Insights’ 112-page May 2Q Update to The McClean Report 2022 is now available for subscribers to download.  It includes a current outlook for the 2022 global economy, detailed market, unit shipment, and ASP forecasts for IC and O-S-D products through 2026, 2021 semiconductor supplier rankings by product type, the 1Q22 top-25 semiconductor supplier ranking, an analysis of the IC market by region with additional focus on the China market, semiconductor R&D spending trends, and an overview of various government-sponsored investment programs targeting the semiconductor industry.

A very clear distinction should be made between China’s IC market and China’s indigenous IC production. IC Insights has often stated that although China has been the largest consuming country for ICs since 2005, it does not necessarily mean that large increases in IC production within China would immediately follow, or ever follow.  As shown in Figure 1, IC production in China represented 16.7% of its $186.5 billion IC market in 2021, up from 12.7% 10 years earlier in 2011.  Moreover, IC Insights forecasts that this share will increase by 4.5 percentage points from 2021 to 21.2% in 2026 (a 0.9 percentage point per-year gain on average).
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Sales expected to strengthen in 2021 with embedded processors and computer CPUs leading the growth.

Total microprocessor sales are forecast to grow 1.4% in 2020 to nearly $79.3 billion, following a 2.4% decline in 2019, which was the first revenue drop in the worldwide MPU market in 10 years, according to data released in IC Insights’ Mid-Year Update to the 2020 McClean Report.   The mid-year forecast shows total MPU sales strengthening with an 8.8% increase in 2021 to reach a new record high annual level of about $86.3 billion, under the assumption that vaccines become available for the Covid-19 virus and the health crisis diminishes in most regional markets next year.

Figure 1 divides the 2020 microprocessor market by end-equipment categories, based on the Mid-Year Update forecast.

Figure 1

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Ten new 300mm wafer fabs expected to open in 2020, two of them in China.

IC Insights recently released its Global Wafer Capacity 2020-2024 report that provides in-depth analyses and forecasts of IC industry capacity by wafer size, by process geometry, by region, and by product type through 2024.

Typically, the IC industry meets most of its IC unit demand by increasing wafer starts, not by dramatically increasing the number of dice per wafer.  The number of good ICs shipped per wafer increased by an average of only 0.9% annually from 2000 through 2019.  As a result, about 86% of the average annual IC unit volume growth over the 2000-2019 timeperiod (6.5%) was met by increasing wafer starts with 14% attributable to an increase in the number of good dice per wafer.

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Potential that China’s economy will break sharply to the downside from its current gradual downward slope .

IC Insights recently released its October Update to The McClean Report 2019.  Part of the update reviewed U.S. and China GDP and PMI trends in light of the current trade friction between the two nations.

Given that the global economy increased by a healthy 3.0% in 2018, it is difficult to comprehend that an economy growing 6% could be considered a risk factor for worldwide GDP growth this year. However, that is the case with China and it’s slowing economic growth. Of concern is that China’s quarterly economic growth will break sharply to the downside from its current gradual downward slope (Figure 1).