China still relies heavily on the import of core techniques and technologies, with 80% of the integrated circuit (IC) chips used in the country being sourced from abroad

China relies heavily on IC chip imports

Staff Reporter

2013-09-29

China still relies heavily on the import of core techniques and technologies, with 80% of the integrated circuit (IC) chips used in the country being sourced from abroad, the Shanghai-based First Financial Daily reports. Gu Wenjun, a senior analyst at market-research firm HIS iSuppli, said China’s imports of IC chips amounted to US$192 billion last year, far more than the US$120 billion spent on oil imports. He added that the country has an acute shortage of high-end chips and its domestic enterprises still cannot develop them due to their weak research and development capabilities, limited capital investment, and lack of production experience.Figures show that China is the world’s largest producer of several electronic products, producing for example 1.18 billion mobile phones and 130 million televisions per year, the paper said. Despite this, China’s mobile phone chip market remains dominated by US chip maker Qualcomm and Taiwan’s MediaTek, which have become the main suppliers of chips used in high-end smartphones and mid- and low-end smartphones, respectively.

In the global IC design market last year, Qualcomm registered sales of around US$13 billion, while MediaTek’s sales reached US$3.4 billion. Meanwhile, China’s leading microchip manufacturer HiSilicon posted sales worth 7.4 billion yuan (US$1.2 billion), accounting for only about 9.2% of Qualcomm’s sales.

Qualcomm owns a wealth of patented technology and is the only mobile chip manufacturer that supports the Apple, Google, and Microsoft software platforms, while MediaTek gained its fame as a leading manufacturer of copycat mobile phones.

Chinese manufacturers entered the mobile phone chip market as early as the 1990s but failed to gain traction in the marketplace. Gu said that domestic chip makers are lagging behind their foreign counterparts mainly because they do not have access to an industry chain, and they vary in commercial strength. In addition, the production techniques and skills of local chip producers are less advanced than those of international manufacturers. Domestic producers also do not have the benefit of a huge capital base on par with foreign producers, said Gu.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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