Why did China import an additional $80 billion in chips in the first 11 months of 2021?

According to data from the General Administration of Customs, from the first 1 to 11 months of 2021, the total number of chips imported by China was 582.22 billion, an increase of 19.3% in the same period, after which China has maintained an import volume of 300 billion US dollars in 2018-2020, and in 1-11 months of 2021, the import amount exceeded 389.06 billion US dollars.

In the past year, China has vigorously promoted the autonomy of chips, but why has the import volume only increased and not decreased? In this regard, Zhu Jing, senior economist of Beijing International Engineering Consulting Co., Ltd. and deputy secretary-general of the Beijing Semiconductor Industry Association, believes that this is mainly stimulated by Sino-US relations, the new crown epidemic, and chip shortages, terminal and system companies will intensify their hoarding in 2021, and some companies even hoard goods for 2-3 years in advance for stockpiling requirements. This hoarding is comprehensive and continuous, involving all kinds of chips.

Zhu Jing said that at least in the next 3-5 years, this import trend will continue, but this does not mean that China's domestic substitution is ineffective. The localization development of chips is not achieved overnight, downstream enterprises need a trial and adoption process, enterprises must first ensure terminal supply, and then gradually carry out domestic substitution.

Zhao Zhanxiang, a partner at Yunxiu Capital, said that the "domestic substitution" in different fields has its own time window, and the pattern of each industry is gradually clear, and as the funds are concentrated to the head, local leading enterprises will appear in the domestic track.

The net import volume is close to 300 billion pieces

According to data from the General Administration of Customs, from the first 1 to 11 months of 2021, the number of exported chips was only about 284 billion, an increase of 23%, and the net import volume was close to 300 billion.

Li Ke, vice president of CCID Consulting, said that as a highly international industry, it is normal for integrated circuits to enter and exit in large quantities. But China's huge trade deficit in this area undoubtedly reflects the inability of domestic industries to meet the needs of a huge market, both in terms of scale and competitiveness. At the same time, we must also see that the export growth rate of domestic integrated circuits has always been higher than the growth rate of imports in the past few years, and the relative scale of the trade deficit is decreasing, which also shows that the domestic integrated circuit industry is making rapid progress and gradually narrowing the gap between supply and demand.

Zhu Jing said that local companies have achieved a certain substitution in consumer memory, which has solved the problem of starting from scratch to a certain extent, and the production capacity is also increasing.

In terms of processors, domestic high-end general-purpose chips represented by Loongson and Feiteng have poured into the field of xinchuang and provided CPUs for the party, government, and military xinchuang markets. At the same time, Feiteng's ARM-based processors and Huawei Kunpeng processors have also achieved certain substitution effects. Some downstream manufacturers are actively adopting these domestic chips, and in the past, their suppliers almost came from Intel and Nvidia.

In last year's shortage of goods, the shortage of automotive semiconductors is particularly prominent, Zhu Jing said that the MCU as the representative of the automotive chip has become the fastest growing domestic category. According to the combing, before 2018, there may be less than 10 domestic automotive semiconductor manufacturers, and so far there have been more than 30, and more consumer manufacturers are also laying out in this direction.

Some emerging chips are also gradually emerging, Zhu Jing said that computing chips for artificial intelligence have become popular, and new DPU, GPU and chip start-ups with integrated chips have emerged in the market, but these companies have not yet formed a market share in China.

150 billion yuan of equity investment hits semiconductors

The breakthrough of domestic technology is largely due to the help of capital. According to the data provided by Yunxiu Capital, it is expected that the total equity investment in the primary market will reach 150 billion yuan in 2021, which is 10 billion yuan more than in 2020, while the total investment in 2019 is only 30 billion yuan, and the investment amount has increased by 5 times in three years. In terms of investment cases, the investment cases from January to November 2021 increased by 50% over last year, from more than 400 last year to about 600, of which more than 50 enterprises with a financing scale of more than 500 million yuan.

Zhao Zhanxiang said that in the secondary market, there are 56 chip companies among the 362 semiconductor companies on the science and technology innovation board, which accounts for 26% of the total market value and occupies half of the top ten market capitalizations. Due to the lack of cores need to expand production, factories need to buy equipment under orders, starting in the second half of the year, the overall market value of semiconductors has grown by leaps and bounds, equipment companies have doubled, and design companies have also risen very high.

Under the guidance of capital, more chip companies flocked to the field of high-end chips, Zhao Zhanxiang said that in 2021, there are more than 50 companies raising more than 500 million yuan, and the direction is mostly high-end chips, with long cycles, large investments, and high technical difficulties, while three years ago, there were few entrepreneurial teams in these directions.

Zhao Zhanxiang said that of the 150 billion yuan of equity investment in the primary market last year, 7% of the companies took 60% of the funds, and these companies will be representatives of China's leading semiconductor companies in the future. The semiconductor industry chain is very long, with many subdivisions. In the future, the industrial pattern of China's semiconductors will be pyramid-type, consisting of a small number of leading enterprises and a large number of specialized new enterprises. The final number of leading enterprises is less than 100, and there will be thousands of specialized new enterprises.