EE Times took a look at the current state of China’s domestic semiconductor foundry industry.  By way of brief history, the Chinese government identified the development of a silicon foundry capability as a strategic imperative, and they’ve invested heavily to build up their foundry capacity.  SMIC has sort of been the flagship of this effort.  Unfortunately, some analysts are starting to question the commercial payoff (leaving aside the military potential for this post):

‘”China attacking the IC marketplace has kind of been a failure,” said Bill McClean, president of chip market research firm IC Insights Inc. (Scottsdale, Ariz.). “You don’t hear them talking about semiconductor manufacturing as much as they were five years ago.”

Semiconductor Manufacturing International Corp. (SMIC) is China’s most successful foundry by far, on target for about $1.45 billion in revenue this year, down from $1.55 billion in 2007 and $1.46 billion in 2006, according to IC Insights.’

The story goes on to remind us that SMIC has reported five consecutive quarters of losses and is currently fourth on the global foundry list (behind Chartered).  Apparently, China’s other foundry plays,

“Hua Hong NEC, HeJian Technology and Grace Semiconductor, are growing, but not as quickly as once hoped.”

I see two problems here.  First, building a domestic industry that can successfully take global share from TSMC, UMC and Chartered requires tremendous technical skill, years of experience and boatloads of money.  China has the money.  Second, while SMIC and its cohorts certainly have a role providing chips for Chinese companies, I seriously doubt that mainstream non-Chinese companies would be willing to commit anything other than far trailing edge technology to a Chinese foundry.  There is just too much risk of delivery delays, poor yields and IP protection issues.

Perhaps simply developing the capability to support military applications is sufficient success for the Chinese government.  I hope so, because it sounds like they are years away from achieving global leadership in either process nodes, or financial results.

I guess that we didn’t really need to be quite so “scared.”

Technorati Tags:  China, China Outsourcing, SMIC, Semiconductors