In 2021, the widespread adoption of 5G, the recovery of the automotive industry, and the development of sectors such as the Internet of Things, data centers, and cloud computing will drive demand growth for semiconductors, especially memory chips, with an expected increase of more than 8% in the global semiconductor market this year. At the 2021 China IC Leadership Summit held by ASPENCORE on March 18, Mr. Wang Bin, Executive Vice President of XTX Technology Co., Ltd., delivered a speech focusing on keywords such as 'opportunities,' 'challenges,' and 'breakthroughs,' sharing the current status and trends of domestic storage chip manufacturers.
Semiconductor market landscape
The global semiconductor market has shown an overall growth trend: in 2013, the market size reached $300 billion; by 2017, it rose to $410 billion; in 2018, it peaked at $470 billion; in 2019, due to a significant drop in memory prices, the market size decreased to $412.1 billion; in 2020, online education, remote work, and other businesses rapidly developed due to the impact of the pandemic, which drove growth in data center services and consequently boosted the semiconductor market by about 5%, reaching $433.1 billion; in 2021, with the widespread adoption of 5G, the recovery of the automotive industry, and the rapid development of IoT, data centers, cloud computing, and other industries, this will further drive the growth of semiconductors, especially memory, with an expected increase of more than 8% in the global semiconductor market this year.
Mr. Wang Bin stated that the semiconductor market can be analyzed from two dimensions: product and region.
From the product perspective, semiconductor products can be roughly divided into four categories: discrete devices, optoelectronic devices, sensors, and integrated circuits. Among them, integrated circuits account for about 80% of the semiconductor product scale. In 2020, the market size of discrete devices and optoelectronic devices decreased, while sensors and integrated circuits grew by approximately 7%. In 2021, all four categories are expected to increase with an average growth rate of 8%.
From the sales region perspective, the semiconductor market mainly includes Japan, Europe, North America, Asia-Pacific, and other regions. In terms of market share, Japan and Europe have comparable shares, each around 8%, with sales amounts of $30 billion to $40 billion; North America accounts for 21% of the global scale, with sales amounts of $90 billion to $100 billion; Asia-Pacific and other regions hold 61.8% of the global market share, with sales amounts close to $270 billion. Among these, China has the highest share, accounting for 35% of the global market.
Looking at the growth rates of semiconductor markets worldwide last year: Japan saw slight growth; Europe experienced a decline; North America had the fastest growth rate, reaching 18%, primarily driven by significant investments from companies like Google, Facebook, Amazon, and Microsoft in big data and cloud computing, which increased demand for memory. The Asia-Pacific region grew by about 4%. In 2021, all regions' market sizes are expected to grow, with the largest increases anticipated in North America and the Asia-Pacific region.
China's semiconductor market has maintained high growth in recent years, achieving a 12.5% increase even when the global semiconductor market declined in 2019, and a 9.2% increase in 2020, with an expected double-digit increase for 2021.
The growth rate of China's integrated circuit market is even higher, with an average annual increase exceeding 10% from 2018 to 2020. With the rapid development of 5G, AIoT, new energy vehicles, and data centers in China, the growth rate is expected to exceed 15% during 2021-2022.
In 2020, China's integrated circuit sales were between 800 billion and 900 billion yuan, with memory accounting for the largest share at 31%, followed by logic chips at 30%, microprocessors, and analog chips taking 23% and 16% respectively. The rise of emerging industries has led to greater consumption of memory, presenting opportunities for domestic Chinese memory manufacturers.
Opportunities and challenges of code storage
China is currently the largest and fastest-growing semiconductor market, accounting for about 35% of the global semiconductor market. For example, in IC design, China's IC design industry sales reached 381.9 billion yuan in 2020, up 23% from 2019, representing about 13% of the global IC market sales. This indicates that our country's IC design industry is thriving. Additionally, the COVID-19 pandemic has significantly transformed the global semiconductor supply chain. Due to effective epidemic control by the Chinese government, many industries' supply chains have shifted to China, driving the development of our digital industry and expanding the Chinese semiconductor market.
Over the past few decades, demand for semiconductors in the Chinese market has been continuously growing. By 2012-2013, semiconductor devices had become China's largest import commodity, and the government strongly recognized that the semiconductor industry would severely impact the nation's economic lifeline. Therefore, at the national level, there has been an ongoing effort to elevate the strategic status of the semiconductor industry. Examples include the establishment of the National Integrated Circuit Fund Phase I in 2014, Phase II in 2019, the introduction of the STAR Market in 2018, and recently incorporating integrated circuits into the '14th Five-Year Plan'.
Mr. Wang Bin commented on this: "Overall, we have the largest and fastest-growing market, supported by national policies and funding, which presents an opportunity of the times. However, we must also recognize the challenges of the era; we lack talent, advanced technology, including materials, equipment, and design software, so the semiconductor industry still requires global collaboration."
In this context, what is the current state of the code storage market? Mr. Wang Bin mainly analyzed the supply and demand sides of NOR Flash and SLC NAND Flash.
Firstly, regarding changes in the demand side for NOR Flash. In 2006, the global market size for NOR Flash reached its peak at $7 billion. However, with smartphones gradually replacing feature phones, the demand for NOR Flash plummeted, falling below $2 billion by 2016. Fortunately, from 2016 to 2017, the IoT industry began to boom, and embedded products continued to develop, leading to a rebound in the NOR Flash market size, which is expected to reach $4 billion by 2022. Secondly, let's discuss specific applications of code storage. Mr. Wang Bin explained using examples from both existing and new markets. The existing market includes set-top boxes, PC BIOS and peripherals, xPON, routers, and smart security systems, all facing demands for upgrades. For instance, in the security field, there has been a shift from analog security to digital security, and then to AI security. Additionally, the growth of emerging needs such as online education and remote work has also driven the development of niche industries. The new market includes wearables, AIoT, 5G communications, automotive electronics, smart homes, AR/VR, among others, which have increased their consumption of code storage. As for supply-side changes, major international companies are gradually exiting or reducing production of niche market products. In 2010, Samsung exited the NOR Flash market. Between 2016 and 2017, Micron shut down its 8-inch NOR wafer factory, and Cypress sold its NOR factory in the United States. In 2019, Taiwanese NOR manufacturers focused on serving the automotive and industrial electronics sectors while controlling the output of small and medium-sized NOR. In 2020, major Japanese and South Korean companies reduced production of SLC NAND. This presents an opportunity for domestic code storage manufacturers.
Unafraid of challenges, XTX seeks a path of breakthrough
We must also face the challenges we are up against—domestic IC design companies mainly operate under the Fabless model, while our leading competitors are primarily IDM factories. In the current situation where wafer capacity is extremely tight, the IDM model has an advantage in supply. Mr. Wang Bin candidly stated that a large amount of capital is flooding into the semiconductor industry, causing some unrest and even overheating. Some players with limited market understanding have also 'jumped' in, further accelerating the entire industry's disorderly competition. Additionally, due to insufficient overall capacity at wafer fabs, NOR Flash and SLC NAND Flash capacities are being squeezed by CIS and logic controllers, leading to increasing supply pressure and cost for code storage devices. Moreover, rising raw material prices and tight packaging and testing capacities pose significant challenges to domestic code storage device manufacturers. So, how does XTX Technology find its breakthrough path?
First, adhere to the company's core values of 'integrity for mutual benefit, openness and innovation, perseverance, and striving for excellence.' Embrace the principles of openness, cooperation, and mutual benefit, and actively collaborate with suppliers and partners along the entire industrial chain.Mr. Wang Bin emphasized: 'In the current environment, we understand and actively cooperate with changes and demands from upstream sectors because we know that maintaining supply-demand relationships and ensuring supply security for end customers is key to achieving mutual benefits.'
Second, focus on serving the incremental market.Focus on specialized field such as touch displays, smart wearables, the Internet of Things (IoT), 5G, and intelligent security. Enhance efficiency and rapidly iterate related products to accurately meet application needs. Increase R&D investment continuously to address market demands, actively layout advanced process nodes, and improve efficiency from a technical perspective by increasing the number of chips produced per wafer. Through constant innovation, enhance product reliability and stability, such as Xintianxia's introduction of innovative low-power, ultra-small package products that support high temperatures up to 105°C.
Third, attract top global design talent to form the core team, and recruit graduates from key universities to form the formation.Promote a culture of diversity, openness, cooperation, and innovation. Financially, XTX has secured funding from renowned investors such as Shenzhen Venture Capital, Sequoia Capital, and State Investment, supporting long-term investments in talent, technology, and products. Additionally,，XTX is one of the few semiconductor design companies where all employees hold shares.
Fourth, innovate in terms of models.
Utilize digital tools to enhance efficiency, collaborate with primary control manufacturers for multiple applications to expand market size, and form strategic alliances with local wafer fabrication plants and testing facilities to create innovative products with high cost-effectiveness.
Mr. Wang Bin also introduced the digital tools currently used by XTX, namely the Xinzijia CRM software.This software is designed for semiconductor IC design companies, covering the entire business process from product development (IPD, or Integrated Product Development), supply chain operations management, to customer relationship management. It enables precise product definition from the outset, shortens the design cycle, integrates upstream and downstream operational processes, and strengthens process management through the sales funnel, thereby enhancing overall efficiency and ensuring sustainable growth for the enterprise.
