Feb 22, 2022

CGP Insight | Unbalanced Supply and Demand in Semiconductor

In 2018, the China US trade war started. The increase in commodity tariffs is only a sign, and the core contest is on the technology track, involving semiconductors, chips, batteries, artificial intelligence, big data and other fields. Among them, in the fields of software, semiconductors, etc., the United States has taken advantage of years of technological blockade, and China is often at a disadvantage because it does not have self-developed chips.


Semiconductors are the core of electronic products and the cornerstone of the information industry. The semiconductor industry is one of the pillar industries of the national economy, and its degree of development is a core indicator to measure the level of scientific and technological development of a country.


Over the past three years, on the battlefield without arms, China is advancing its strengths in the field of science and technology to be at the forefront of the world. In industries such as smartphones, drones and new energy vehicles, China has strong international competitiveness, and some industries are even far ahead.


The investment enthusiasm is high

In 2021, the downstream semiconductor industry will be affected to a certain extent due to the shrinking of global semiconductor silicon wafer shipments and market size. However, the popularity of 5G and the recovery of the automotive industry will bring benefits to the semiconductor market. The size of the semiconductor market is expected to hit a record high, thus driving silicon cell to resume growth.


From an industry perspective, with the development and progress of the Internet of Things, 5G, cloud, artificial intelligence and other fields, semiconductor is promoting the digital transformation of the global economy. As the core components of electronic devices and systems, semiconductor is used in mobile devices, automobiles, consumer electronic products, 5G wireless infrastructure, etc., so that it has very broad room for growth in the future.


Semiconductors are a capital-intensive industry, and the demand for expansion requires substantial capital support, and the enthusiasm for investment in this industry is high. Most semiconductor companies want to seize the opportunities brought about by the "lack of self-developed chips" and use IPO financing to speed up their expansion.


China accelerates the process of localization

80% of the global supply of semiconductors comes from Asia. Factors such as over concentration of production bases and large--scale semiconductor factories have made major countries such as the United States and European countries deeply uneasy about the security of their supply chains. Affected by the COVID--19 and technology blockade, semiconductor supply and demand have broken the balance, and the supply chain has fluctuated sharply. In this context, China has accelerated the process of localization of the semiconductor industry chain and supply chain, and continued to inject development momentum from multiple dimensions such as policy, technology, resources, and capital.


China is the world's largest chip importer and consumer market. Without China's participation, there would be no complete semiconductor industry chain. In recent years, in order to further encourage the overall development of domestic semiconductors, break foreign monopolies, and enhance technological competitiveness, relevant state ministries and commissions of China have issued a series of policies and regulations to support and guide the development of the semiconductor industry.


The current "Moore cycle" is slowing down, and the domestic substitution is booming. China should grasp the strategic window period and use a new nationwide system to accelerate China's substantial breakthroughs in the global semiconductor supply chain.


Faced with inflated opportunities for talents 

For such a high--tech industry, the supply of talents is far below market demand. At present, the total shortage of chip talents in China is as high as 300,000. Domestic leading semiconductor chip companies, such as Semiconductor Manufacturing International Corporation(SMIC) and Shenzhen HI Silicon, have a staff turnover rate of more than 15% in 2020.


According to Norman Lau, General Manager of CGP Group’s Shanghai office and head of the semiconductor industry recruitment team, "the market recovery and talent emergency have led to a certain chaos in the labor market, and there is great bargaining space for high--quality talent. Usually the candidates contacted have at least three or four offers, some of them have nearly ten. In addition to well--known multinational companies and local companies offering excellent remuneration to snatch talents, some emerging small companies are also entering the market to share the cake."


Despite the vigorous development of the semiconductor industry, Norman recommends that talents should focus on one field as much as possible and should not be short--sighted for immediate benefits. Companies should also improve training and incentive systems to retain talents, achieving a virtuous circle.


Although technological improvements in high--end chips, advanced semiconductor equipment, and wafer manufacturing processes require time to advance, China is investing heavily in next--generation technologies such as 5G, AI, IoT, and quantum computing. "New infrastructure" represented by high--speed rail, new energy, 5G networks, electric vehicles and industrial Internet of Things will drive the rapid growth of the semiconductor industry.


At the talent level, in addition to attracting international talents, it is more important to cultivate local talents. It is the top priority to reform the education system, speed up the training of higher education, improve the level of salary and welfare, and facilitate the corporate human resource system.