China to See 20 New Chip Plants by 2008

• Posted: Saturday, June 18, 2005
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• Author: pradhana
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• Filed under: Miscellaneous

SAN FRANCISCO - China, the electronics manufacturing hub of the world, is expected to build 20 new semiconductor fabrication plants over the next four years, but the projects will rely on older, less efficient equipment than that used outside China, a trade group said on Thursday.

Semiconductor Equipment and Materials International (SEMI), an international trade group representing U.S. chip equipment suppliers, said in a report that many of these plants, expected to be built by 2008, will be equipped with used or refurbished equipment.

Many of the top 10 semiconductor companies manufacture their chips in the United States, Europe and elsewhere in Asia, and then send the chips to China to be packaged and tested. With a large Chinese domestic market, however, chip makers are now increasingly looking to produce more chips within China.

Though most of the world's largest chip producers are racing to build production facilities in China, they are reluctant to, or prohibited from, locating their most advanced processes and designs in the country. U.S. equipment makers, for instance, are banned by federal law from selling advanced chip production tools to China.

Over the next five years, most semiconductor production fabrication plants or foundries are likely to keep building chips on older and less efficient technology using wafers of 150 millimeters or less in diameter and feature sizes of 1 micron to 0.35 micron circuits.

By contrast, the world's leading chip makers are focusing on upgrading their production lines to the latest 300 millimeter wafers and are building circuits on production lines under 0.10 microns, hundreds of times thinner than a human hair.

As these leading companies replace existing production capacity outside of China with more advanced equipment, China is likely to buy up used 200 millimeter and 0.25 micron equipment that is now a mainstay outside of China, SEMI said.

The report notes that China is now responsible for only a small percentage of global semiconductor production, but the concentration of new production plants is increasing relative to other regions.

While 40 domestic companies produce chip production equipment, most such gear comes from non-Chinese suppliers, it said.

In 2004, new chip equipment sales in mainland China reached $2.73 billion. Packaging materials amounted to $781 million, fabrication plant material sales $391 million and used or refurbished equipment $180 million.

The local supply chain remains immature, the report said, because of limited financing and a shortage of locally available skilled employees. Some multinational chip makers, it said, are concerned that Chinese manufacturers could steal their chip designs because of ineffectual intellectual property protections.

The 115-page SEMI report, a summary of which was provided to Reuters, is entitled "China Capital Equipment and Electronic Materials Outlook."


Source: China to see 20 new chip plants by 2008

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