Grace Semi chief says China will dominate by 2010

Zou Shichang, chairman of Grace Semiconductor Manufacturing Corp., boldly predicted in an interview here that China will become the epicenter of global IC manufacturing by 2010.

With a greater emphasis on manufacturing, IC demand in China surged in 2004 to about $24 billion. Zou said that could be only the tip of the iceberg since China currently supplies only 17.5 percent of its total chip demand. That underscores the huge potential growth in China's chip demand.

China currently accounts for about 13 percent of the world's semiconductor market.

Said Zou: "In terms of market, opportunities as well as applications, I see great potential in all areas. For instance, China is switching from analog to digital TV. It's a huge market."

China is estimated to have close to 300 million TV sets, most of which will switch to digital broadcasts. "The mobile phone market is another hot market where China has to develop chips for the mobile phones," Zou added. China long ago eclipsed the US (174 million units in Nov. 04)as the leading mobile phone market, with 334 million at the end of 2004.

IDC estimates handset shipment in China will be close to 100 million this year, about 18 percent growth. Subscriber growth is slowing as replacements now drive sales.

According to Zou, China must move beyond being simply a low-cost manufacturing and assembly hub. "China has to cooperate with international technology vendors and partners in the use of core technology as well. There has to be viable technology transfer if China is to collaborate with long-term technology partners."

Added Zou, "Some countries are only looking at market share in China, and they do not want to export their core technologies. Technology transfer and increasing market share must go together. One without the other is going to be a stumbling block for any long-term relationship," he said. China wants to work with foreign companies to develop core technology as well. That's why Bejing has invested heavily in development of a process technology roadmap.

SMIC is doing back-end copper at 0.13 micron in Shanghai. In Beijing, it has qualified 0.14-micron DRAM and is working on 0.11-micron technology. Fabs like Grace Semiconductor are now shooting for 0.13 micron technology using copper interconnects. Chinese chip makers will seek to deploy 90-nm technology soon.

"We hope to produce 33,000 wafers per month in the second half of this year," compared with the current 25,000 wafers, the Grace chairman said.

Zou said Grace has broken even in terms of cash flow but conceded that "we are not profitable yet." He said Grace is looking for European and U.S. partners, and that the door is still open for international process technology partnerships.

"Of course there is increasing competition in the memory and logic components markets, but there is also an increasing opportunity for greater collaboration between various fabs and design houses," stressed Zou. China has yet to see a dip in demand for ICs. If Grace Semiconductor turns a profit this year, Zou said he hopes to take the chip maker public on the U.S. and Asian markets, including an IPO sometime next year.

Possible partners here include Singapore's Institute of Micro Electronics and perhaps Chartered Semiconductor.

Shanghai-based Grace Semiconductor has so far invested $1.63 billion in its chip operations. It is currently operating an 8-inch fab at full production.

- Tony Sitathan

EE Times

Mike Clendenin from Taiwan contributed to this report