Shanghai angles to become Asia's chip hub
By Sunray Liu
EE Times
(10/04/00, 07:40:14 PM EDT)
SHANGHAI, China - This gleaming city on the bustling Yangtze River and its environs are fast becoming the center of China's emerging semiconductor industry, thanks to preferential government policies designed to spur IC and software development and attract foreign investment. Indeed, the Chinese IC design sector, largely based here, has become a magnet for foreign investment as part of the latest wave of high-tech funding.
Shanghai and the surrounding area of eastern China have become the base of the country's strategically important semiconductor industry. Manufacturers such as Shanghai Huahong NEC, Shanghai Belling, Shanghai Advanced Semiconductor, Wuxi Huajin Group, HJ-CSMC and Shaoxin Huayue Microelectronics have already located here. And many packaging and test factories, such as Shanghai Alphatec, Shanghai Intel and Toshiba Wuxi and other IC design companies have set up operations in the surrounding area.
Neighboring cities Kunshan and Suzhou are also becoming new OEM centers, thanks to the promotional efforts of an array of local government economic agencies. Those government offices, along with established electronics companies, are seeking to build up the local industry to become a regional force that will eventually make this "Silicon Harbor" a force in the global semiconductor industry.
The promotional effort got a major boost recently when a number of Taiwanese companies announced plans to establish foundries in Shanghai, and the number of interested companies continues to grow. The Formosa Plastics Group of Taipei and others are also considering cooperative ventures with companies based in mainland China. Investment totaling as much as $10 billion is expected to pour into the region, and 0.25-micron process capability is being established for use with 12-inch wafers.
Restrictions on funds and technology crossing the Taiwan Strait could make it difficult to meet these projections, observers warned. But several projects have already been launched in the Zhangjiang High-Tech Development Zone around Shanghai, and analysts said Taiwanese investors are scrutinizing the area. The IC design industry is likely to be the first industry segment to emerge as a regional player.
While such other industry sectors as manufacturing, packaging and testing remain in a formative stage, the semiconductor design segment is gaining ground here. The region clearly outpaces the rest of China in its design capability, and it has in turn benefited from the high degree of sophistication and international presence that design projects bring with them. Chinese officials are promoting the area as a haven for Asian IC design - much as Bangalore, India, has become an Asian center for software design.
"So far there are at least 40 IC design houses based in Shanghai," said Wang Ye, deputy director of the Shanghai IC Design Industrialization Base, part of the Shanghai IC Research and Development Center. Sixteen of the companies belong to the base program; others are taking part in the so-called Product-Design-Chip (PDC) effort. Together, the companies are expected to generate $300 million in annual production value, Wang said.
The IC design base - the first of its kind in China - was developed by the Ministry of Science and Technology and launched this past February. Shanghai's municipal government appropriated $15 million in special funding to help establish the Shanghai design center as part of the government's overall technology development strategy.
The design base is partially intended as an incubator for IC design companies. The base includes 31 design and test companies. Of the 16 design companies, four are from Taiwan, one is from South Korea and six are from mainland China.
The IC research center provides laboratories equipped with advanced EDA software and testing platforms. It is developing a national multiproject wafer support program offering process technologies down to 0.35 micron. Training designers and support staff is also a priority, as is furthering the PDC design plan, which aims to combine functional design with IC and product manufacturing. Together, the groups will seek to develop 100 ASICs within the next three years.
A matter of policy
A policy directive issued by the State Council of China and implemented by the Shanghai municipal government offers preferential treatment to IC makers and the software industry. Sources here said more government directives are forthcoming, including the launch by the Shanghai Science and Technology Committee of a business incubator plan that will include attracting venture capital and preferential tax treatment for new companies.
Wang predicted that more than 50 companies, including 30 IC design houses, will be located here by the start of the next lunar new year in February. Fueling the optimism is the success of Fudan Microelectronics Co. Ltd., which recently completed an initial public offering on Hong Kong's Growth Enterprise Market. The company, headquartered at the National ASIB Laboratory at Fudan University, was founded in July 1998 with a $1.2 million investment. Its market value has since jumped to about $150 million.
The successful public offering not only showed the value of Fudan but also has helped Chinese companies attract top design talent by offering stock options. "We know people are the most important factor in this industry," said Yu Jun, deputy general manager of Fudan Microelectronics.
The new public company will become a joint venture, thus enabling it to benefit from preferential government tax and investment policies. Being a publicly trade company based in Hong Kong also means Fudan Microelectronics will be recognized as an international company. Under Chinese rules, that status makes it easier to set up offices in Hong Kong and perhaps in California's Silicon Valley as well. International status also makes it easier for overseas companies to share intellectual property (IP) and to forge licensing agreements. IP holders are a key target for Fudan and its global investment fund.
As a public company, Fudan Microelectronics will be able to acquire IP by purchasing other companies. Investment could also be used to strengthen ties with foundries, enhancing those relationships and ensuring that Fudan is able to compete in global markets with shrinking design and product cycles.
Fudan employs more than 40 IC designers and plans to increase its growth rate by 50 percent this year. It will focus on IC cards, power electronics, communications, and mobile and automotive electronics. IC cards will be manufactured by Singapore's Chartered Semiconductor. Fudan officials said they hope to develop more than 20 new products this year alone.
EDA push
EDA tool vendors, meanwhile, are becoming as important here as foundries and are looking to Shanghai as a way to break into the Chinese market. Their arrival here is expected to boost the domestic chip-design industry.
As one of China's four largest tool suppliers, Avanti recently established a research center here that will design products for the global market while developing specific products for the local market.
Avanti Microelectronics Co. Ltd. (Shanghai) was created in 1998 with an envisioned team of 80 designers to develop and support products. Avanti chairman Jerry Hsu subsequently decided to enlarge the scale of development, building a team of 500 employees who today make up the company's largest development center. The center's focus is global as well as domestic.
Avanti Shanghai's 200-person engineering team here uses the Internet to exchange data with other Avanti centers around the world. The stature of the Shanghai branch has grown as it has worked with other international development centers.
Tools under development here include the Star-Hspice simulator, Star-MTB cell description and integration tool, libraries for foundries and a Verilog verification kit for the Chinese market.
Other EDA tool suppliers are also increasing their investment in Shanghai. Synopsys and its Chinese partners shifted their scaled-down version of the Design Automation Conference from Beijing to Shanghai this year, and Synopsys China chief executive Chi-Foon Chan spends increasing amounts of time here visiting IC design companies and their partners.
The Chinese design industry "is somewhat like Silicon Valley 20 years ago, full of spirit and hope," Chan said, adding that the keys to success in China include government support, engineering talent and faster development of communications products as Chinese demand for those products grows. Synopsys plans to establish development centers throughout China.
Other design companies have taken different approaches to the Chinese market. For instance, the Shanghai-based offices of Trident Multimedia Technologies, Epson Components and Lattice Semiconductor have moved from supplying design services for an overseas parent company to designing ICs directly for the Chinese and global markets. In so doing, they have integrated themselves into the Chinese electronics market.
Frank Lin, chairman of Trident Microsystems Inc., said the company first focused on the Chinese market in the early '90s via a deal with a Shanghai chip maker. In 1998, Trident invested $6 million to set up its Shanghai-based design unit. The company designs ICs for consumer electronics and multimedia chips for PCs, and it offers a VLSI design service here.
Among the offerings designed by Trident's 130 engineers here is a digital TV chip that has been embraced by TV manufacturers girding for the transition from analog to digital broadcasts. Trident's customers include set makers Changhong, Konka and TCL. Trident's recent shift to 0.15-micron process technology has spawned a 1 million-gate design for digital-TV applications.
Systems haven
Systems companies such as Shenzhen Huawei Technologies and Zhongxing Telecom Equipment Corp., meanwhile, are utilizing ASIC design centers in Shanghai.
One such center, Huawei Shanghai, plans to enlarge its team to 50 engineers by the end of 2000. Its key project is development of a wideband-CDMA chip set. Work has been completed on a front-end logic design for baseband and intermediate frequencies. A back-end design will soon be transferred to the company's manufacturing arm for production.
Shanghai Bell and ZTE Corp. are also focusing more on IC design. The EDA team at Bell has played a high-profile role in the development of ISDN technology in China, and ZTE Shanghai has designed an RF module and Layers 2 and 3 software for GSM phones. A deal between Texas Instruments and ZTE targets the design of a cell phone chip set using 0.15-micron process technology. The chip set is expected to roll in the fourth quarter of 2001.
The design branch of the state-backed Huahong Group, Shanghai Huahong Integrated Circuit Co. Ltd., has formed a development team for IC cards. Initial production at Huahong IC is projected to total $6 million. Annual revenue from smart card IC production could reach $120 million at the company in five years. |
