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EDITORIAL: Countering Chinese competition
China is becoming a major competitor as its manufacturers rapidly improve their technology to feed the voracious demand of white box electronics vendors.
With strong support through subsidies and direct funding, Chinese suppliers are gaining a strong foothold in their fast-growing domestic market and are drastically altering industry supply chains. Some small-scale Taiwanese suppliers have been forced out because they could not adjust their business strategies to cope with the changes to the supply chain.
Taiwanese panel makers, led by Innolux Corp and AU Optronics Corp, used to be the major panel suppliers for Chinese TV brands. They have adjusted their business strategies to focus on developing innovative products as Chinese rivals nibble away at their market share by churning out standard panels.
In a new raft of industry policies unveiled by Beijing in June, China is apparently targeting the semiconductor manufacturing and chip design segments as its new focus. Based on the new measures, China aims to foster local chip companies and build its own supply chain.
At first glance, there is nothing new in China flexing its muscles and mobilizing national resources to foster select industries. However, what is new is that China plans to launch a 120 million yuan (US$19.6 million) investment fund and form a special task force to help its semiconductor companies improve their competitiveness.
With those new measures, China aims to grow the country’s semiconductor industry revenue at a compound annual growth rate of 20 percent until 2020.
Meanwhile, the global semiconductor industry has ebbed into slow growth of between 3 and 5 percent annually over the past five years.
China also aims to create a chip packager and tester that can compete with global rivals.
Merger-and-acquisition deals will be a shortcut to enhance competitiveness.
Earlier this month, Jiangsu Changjiang Electronics Technology Co, China’s largest chip packager and tester, reportedly bid to acquire Singapore-based chip packager and tester STATS ChipPAC Ltd after obtaining funding from the Chinese government. STATS ChipPAC is the world’s No. 4 chip packager, based on Gartner Inc’s statistics.
Taiwan’s Advanced Semiconductor Engineering Inc (ASE) and Siliconware Precision Industries are first and third respectively.
Jiangsu-based chip packager Natong Fujitsu Microelectronics Co president Bill Shi (石磊) said on Thursday last week that Beijing’s financial support has helped the company get through its toughest period and that he believed the aid would help Chinese companies catch up to ASE in the next three to five years.
There will be no immediate threat from Chinese rivals, as ASE, Taiwan Semiconductor Manufacturing Co (the world’s top contract chipmaker) and MediaTek Inc, which holds a 50 percent share of China’s handset chip market, still have great technological advantages.
Some Taiwanese semiconductor insiders say Beijing’s increased influence is creating pressure, although talent and ability to innovate will help Taiwan maintain its lead in the industry.
“Taiwanese engineers have solid technological capability and are willing to work hard, while Chinese workers have only the ambition to build a better personal career,” a high-ranking executive from a well-known semiconductor company said.
The person asked to remain anonymous.
It is a pressing issue for local semiconductor companies to retain skilled employees and experts to maintain their leading positions. In addition to seeking the government’s help, such as delays to taxing stock bonuses and relaxing rules on issuing restricted stocks for employee bonuses, local firms should introduce creative measures to keep top employees.
source: Taipei Times
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