A worker checks a chip product on Monday at a factory in Sihong Economic Development Zone in Sihong County, east China’s Jiangsu Province. Photo: VCG
Chinese chip makers expect very limited impact from recent monthly drop in production due to logistical hurdles, booming demand, long delivery times and US restrictions on Chinese tech companies , calling it a “temporary crisis” which will be alleviated with the expansion of production.
Chinese production of integrated circuits fell to 30.1 billion units in October, from 30.4 billion in September, after hitting a record 32.1 billion in August, but production in each of three months posted annual growth of more than 20%, according to the National Bureau of Statistics.
The month-over-month decline is the result of supply bottlenecks resulting from a shortage of global chip production capacity, analysts said.
“The drop in production was in part due to the ongoing pandemic in many parts of the world, including some countries in Southeast Asia, one of the main flea processing regions, where production halted. has posed continuing uncertainties for chip supply, ”an industry insider said. the Global Times on Wednesday on condition of anonymity.
A chip production line uses more than 30,000 parts and components, many of which rely heavily on imports. If anything is missing, production and deliveries will be delayed, another industry insider said.
An employee named Zhang at a chip packaging and testing plant based in east China’s Jiangsu Province told the Global Times on Wednesday that although the facility is operating at full capacity, its production fell about 5% in October compared to September, due to tight supply. certain components from abroad.
“We plan to expand our capacity again to meet growing demand after the last expansion in March, which is necessary in the long term,” Zhang said. This latest capacity expansion may take longer due to logistical hurdles, the outbreak and other unspeakable restrictions.
China’s leading chipmaker Semiconductor Manufacturing International Corp (SMIC) said last week that its capacity expansion faces constraints.
The world’s leading chipmakers have said chip shortages will continue until at least 2022, while some foundries have said they run out of wafer capacity until 2023.
There are also concerns that this trend may impact downstream businesses, ranging from home appliances to mobiles and new energy vehicles (NEVs).
But industry insiders have said that compared to the difficult times experienced in the first half of 2021, the global chip shortage has been relatively alleviated and its impact on businesses will be limited and manageable.
In previously announced third-quarter results, SMIC said revenue reached more than $ 1.41 billion, exceeding market expectations, with an increase of 30.7% year-over-year.
Despite US restrictions and supply chain disruptions, SMIC said 12-inch production capacity will be tripled over the next few years with the addition of three new wafer manufacturing plants. in Shanghai, Beijing and Shenzhen in the province of Guangdong (southern China), which means an additional 240,000. wafers per month, to meet the growing localization needs of end customers.
China’s participation in the chip industry has grown rapidly. In 2020, the production value of packaging substrates on the Chinese mainland was $ 1.48 billion, which was about the same as that of global packaging substrates, according to the reports. industry data.
China accounts for 20-30% of the total US chip company market, and this proportion is expected to increase as the country embraces 5G, NEVs, and smart industries, where advanced chips are used heavily.
In order to restrain China’s semiconductor development, the United States has imposed stricter export controls on software, equipment, and other technology used to make chips in recent years, but such attempts will ultimately fail since the US government should know that it will potentially be a bigger loss for US businesses, an industry insider said.