A few days ago, Xiaomi car SU7 was released, and the popularity remained high, and the debate between Xiaomi and Huawei and other companies is still attracting attention. It is reported that each Xiaomi SU7 is equipped with two NVIDIA DRIVE Orin chips containing 17 billion transistors, with a total computing power of 508TOPS, that is, 508 trillion calculations per second. Just 60 years ago, the number of transistors on a cutting-edge chip was not 17 billion, but four.
Chris Miller, associate professor of international history at Tufts University's Fletcher School and director of the Eurasia region at the U.S. Foreign Policy Institute, published in October 2022, was named the Financial Times Business Book of the Year 2022 and The Economist Book of the Year 2022.
Dr. Miller conducted more than 100 interviews with semiconductor experts from industry, academia and government in the course of his writing, and drew on a large number of academic studies and news reports to tell the story of the changes in the chip industry in the past hundred years since the chip was invented in the 40s of the 20th century. Readers may wish to think of this book as a wonderful historical novel, in which technological adventures, business war stories, and political and economic games may be inspiring.
Hikiko
"Whoever masters the precision will be the first to lock in the victory"
From knotted notes to abacus, pen and paper, to mechanical and electronic calculators – from the first time they learned to count, people have been trying to use tools to help them calculate. At the same time, the need for calculations grew, and during the Second World War, the air forces used mechanical bomb sights that relied on mechanical computers, and the crews adjusted the bomb drop time by entering the wind speed and altitude with a measly 20% accuracy. At that time, the countries at the heart of the dispute understood that whoever could master the higher precision calculations would be the first to lock in the victory of the war.
To achieve greater accuracy, engineers began replacing the mechanical gears of earlier computers with electric charges. Such electronic calculators use vacuum tube technology to form the codes "1" and "0", two numbers that can be produced arbitrarily using a binary counting system, so many types of calculations can theoretically be performed – but they are simply too cumbersome, too slow, too unreliable, and technicians are busy finding and replacing broken parts every day, and scientists desperately need to find a smaller, faster, and cheaper switch.
The birth of the chip and Moore's Law
"The Greatest Technological Predictions of the 20th Century"
In 1945, when the course of world history was moving from the hot war to the cold war, William Shockley, who was born into a family of engineers, first proposed the theory of the "solid-state valve", postulating that if an electric field was applied to a semiconductor material such as silicon, it could attract "free electrons" inside it to gather near the edge of the semiconductor. If the electric field attracts enough electrons, the edges of the semiconductor become conductive materials through which current can flow.
Just three years later, not only was the hypothesis proven, but the chip was also invented based on this theory. Even Shockley, who never underestimated his own importance, could not have imagined that in the future, thousands and billions of such lenses would soon replace the human brain on a microscopic scale to complete computational tasks.
Fairchild Semiconductor relied on this technology to win the order for the "Apollo Program" with the goal of manned landing on the moon, and TI also proved to the U.S. Air Force that the use of integrated circuit technology can reduce the weight of the "Minuteman II" missile to less than half. By the mid-60s of the 20th century, chips were used in a wide range of weapons, from satellites to sonar, from torpedoes to telemetry systems.
Military and aerospace applications provide a lot of money for the early development of chips, while the vast civilian market inspires companies to further increase research investment, and the computing power and quantity of chips are developing at a terrifying rate. In 1965, Gordon Moore wrote a short essay about the future of integrated circuits. He predicted that Fairchild would double the number of devices on silicon chips every year for at least the next decade — a projection of exponential growth that came to be known as "the greatest technological prediction of the 20th century – Moore's Law."
Chips, from Silicon Valley to the world
"Everybody has to make semiconductors?"
1968 witnessed an important moment in the chip industry. One of the founders left Fairchild to start his own electronics company. This company was the largest and most advanced chip manufacturer in the United States, Intel. Two years later, Intel introduced its first product, a chip called DRAM, where tiny transistors and capacitors replaced magnetic cores, making a quantum leap in the storage power of computers. Soon after, Intel introduced the 4004 chip, claiming it as the world's first microprocessor – a "miniature programmable computer on a chip." Since then, chips have been widely used inside home computers, telephones, washing machines, automobiles, and more—and the speed at which humans can process and retrieve information has increased by a factor of 1 million to 10 million in just 20 years.
In addition to American companies, Japanese and South Korean chip companies have also gradually entered the "war situation" and emerged with different business advantages. Japanese companies such as Hitachi, Toshiba and NEC have shown their advantages in manufacturing and service, and with the strong support of the government, their increasing yield rate and excellent after-sales service have brought higher and higher market share. South Korean companies represented by Samsung have actively signed contracts with Silicon Valley companies, and they have signed a joint venture with Intel to sell Intel's own brand chips produced by Samsung, relying on the advantages of low cost and low wages, and have gradually gained a place in the world chip market.
Changes in the global DRAM market share from 1980 to 1990
数据来源：Semiconductor History Museum of Japan，1980/01/01-1990/12/31
Looking at China at this time, TSMC keenly discovered the problem that semiconductor design and manufacturing are difficult to separate, relying on the bold promise of "never designing chips, only manufacturing chips" to avoid competition with giants, focusing on building the world's most advanced chips, and winning giant customers in Silicon Valley. At the same time, in the 80s of the 20th century, with the government "putting the electronics industry in a strategic priority position", China gradually entered the center of the historical stage of the chip industry.
Rapid development of Chinese chips
"Everything we are competing for"
Benefiting from the vast market and strong support from the government, China's chip industry has made significant progress. Since 1986, when the Ministry of Electronics Industry issued the Seventh Five-Year Plan for Integrated Circuits and put forward the "531" strategy, China's chip manufacturing level has been steadily improved, and the goal of "popularizing 5-micron technology, developing 3-micron technology, and tackling 1-micron technology" has also become a reality step by step. In June 2014, the State Council issued the "National Integrated Circuit Industry Development Promotion Outline", which elevated the development of the integrated circuit industry to a national strategy, and China's chip industry is firmly moving towards the world's advanced level.
It is worth noting that the sales scale of China's chip market is also expanding, gradually growing into the world's largest single chip sales market. According to the data of the WSTS World Semiconductor Trade Statistics Organization, the sales scale of China's semiconductor market has increased from 91.375 billion US dollars in 2014 to 192.5 billion US dollars in 2021, with a compound annual growth rate of more than 10%;
Source: Statista, 2022/01/01-2022/12/31
"Chip Wars" mentioned that in recent years, 5G has become a new position in China's chip industry. "When Huawei's Ren Zhengfei started acting as an agent for a telephone exchange in Hong Kong, the network equipment could only connect one phone to another...... Today, this information is transmitted over the radio network." The book argues that, on the one hand, "China's 5G technology will point out the direction of the future development of the information society", and on the other hand, the development of 5G has also put forward new requirements for independent research and development of China's chip industry - Huawei and other Chinese companies have focused on improving their independent chip manufacturing and design capabilities to enhance the core competitiveness of China's chips, "If you speculate according to the trend of 2019, then by 2030, the influence of China's chip industry may be comparable to that of Silicon Valley."
In the field of artificial intelligence, which is in full swing, China is also deeply involved in this "war". This book argues that computing power has always been at the core of the "chip wars", and that the end of computing power is talent and engineers. The book cites research by think tank MacroPolo that found that "29 percent of the world's leading AI researchers are from China, compared to 20 percent in the United States and 18 percent in Europe." With the emergence of phenomenal artificial intelligence models such as ChatGPT and Kimi, this "war" powered by talent and technology may continue to be staged. According to Next Move Strategy Consulting's forecast, the global AI industry will expand by more than 150% in five years, and new investment opportunities may be emerging.
数据来源：Statista，Next Move Strategy Consulting，2022
In the 2023 annual report of China Industrial Securities Global Fund, a number of fund managers also shared their views on AI and the semiconductor industry, which we also excerpt here for the reference of readers:
In 2023, new technologies represented by AI will show good development prospects and broad application space, and other new technologies such as humanoid robots, VR, and intelligent driving will also make phased breakthroughs. Although the prospect and timing of the killer application of these new technologies are still unclear, the relevant tracks have high odds for a long time, and the stock price also shows high volatility of thematic investment.
With the gradual embodiment of the internationalization capabilities of the mainland's mid-to-high-end manufacturing industry, the total export volume of products in the fields of electronics, automobiles, machinery, and new energy has continued to reach new highs in recent years, and the global share of products of leading listed companies has increased. In China, we will continue to track the progress of various fields on the premise of considering risks, and hope to continue to explore investment opportunities for the acceleration of technological change or the improvement of the prosperity of sub-industries.
- Xie Zhiyu
Deputy General Manager of China Industrial Securities Global Fund, Investment Director, Director of Research Department and Director of International Business Department of Fund Management Department
Xingquan Herun Hybrid, Xingquan Heyi Mixed (LOF) (co-managed), Xingquan Social Value Three-year Holding Mixed Fund Manager
In 2023, emerging technology fields such as AI, VR/AR, and robotics have attracted much attention, and they can be positively expected to improve production efficiency, and are expected to become one of the important drivers of global economic development from a long-term perspective. Looking forward to 2024, technological innovation will bring new markets and new demand, and there will be a process of quantitative change to qualitative change in the future, and the related industrial chain will continue to nurture investment opportunities.
- Housewarming
Deputy Director of China Industrial Securities Global Fund Management Department
Xingquan Business Model Hybrid (LOF), Xingquan New Vision Hybrid, Xingquan Hefeng Three-year Holding Hybrid (Co-Management) Fund Manager
Regarding the biggest topic of the year, AI, we still have some ideas after research for reference, and we will continue to pay attention to and raise the level of awareness: AI is a powerful tool for large-scale discovery of correlations, especially for finding the optimal solution for a given goal, but it still belongs to the category of tools to improve efficiency, and is the basis for innovation, not innovation itself; AI may have great social value similar to printing press and the Internet; the direct application of AI may also require security, culture, The multiple inspection mechanism at the social level may not be implemented quickly and on a large scale.
- Zou Xin
Manager of Xingquan Green Investment Mixed Fund (LOF) and Industrial Securities Global Innovation Advantage Mixed Fund
Under the breakthrough and iteration of AI technology, along with the improvement of new scientific and technological infrastructure and the implementation of technology in the application side, the improvement of efficiency of technology has gradually penetrated into the use of terminals, and the impact on the existing industry and incremental demand will be gradually reflected in different aspects.
- Tong Lan
Manager of China Industrial Securities Global Xinyue Mixed Fund
epilogue
"The Future of Globalization"
In fact, the development process of chips has shown that the trend of globalization of the semiconductor industry is irreversible. In today's increasingly close global economy, the importance of the semiconductor industry, as one of the core driving forces of scientific and technological development, is self-evident. From a business and investment perspective, "The story of Silicon Valley is not just a story about science or engineering, the history of semiconductors is also a story of sales, marketing, supply chain management, and cost reduction – technology only advances when it finds a market. ”
This is the time to read
"Reading at this time" is a reading column launched by China Industrial Securities Global Fund, recommending good books worth reading at the moment.
Reference: "Chip Wars: The Battle for the World's Most Critical Technologies". Risk Warning: This article is an investor education material, and is only used to provide investors with rich and multi-angle investor education materials, not marketing materials, nor is it a recommendation, introduction or prediction of a particular security or securities market. The content of this article should not be relied upon as a forecast, research or investment advice, nor should it be construed as a recommendation to buy, sell any security or adopt any investment strategy. The views of the fund managers are excerpted from the 2023 annual reports of each fund of China Industrial Securities Global Fund, and the specific views are detailed in the original report. The Company promises to manage and use the fund property in good faith, diligence and responsibility, but does not guarantee that the fund will be profitable, nor does it guarantee the minimum return, investors should carefully read the relevant fund contracts, prospectuses and other documents when investing in the company's funds, and choose the corresponding risk level of fund products according to their own risk rating. The mainland fund has been in operation for a relatively short period of time and does not reflect all stages of the development of the stock market. Past performance of a fund is not indicative of its future performance, and the performance of other funds managed by the fund manager or the performance of other funds previously managed by the fund manager does not constitute a guarantee of the performance of the fund. The views represent only individuals, do not represent the position of the company, are for reference only, not as investment advice, and the views are time-sensitive. Funds should be invested with caution and should be chosen carefully. By participating in this submission activity of China Industrial Securities Global Fund, the contributor is deemed to be authorized to China Industrial Securities Global Fund Management Co., Ltd., and the Instant Securities Global Fund can use the relevant materials (including avatars, photos, texts, etc.) provided by investors on the company's self-media platform, other cooperative media platforms, printed materials and other media. The final interpretation right of this activity belongs to China Industrial Securities Global Fund.