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China’s semiconductor strategy is bad news for foreign companies


This is a guest post by Anthony Kimery, former Editor-in-Chief, Homeland Security Today.

China’s government seems to be taking off the gloves when it comes to competition in the global market for semiconductors and related technology. As the world’s biggest manufacturer of mobile devices and consumer electronics, China imported US$227 billion of chips in 2016, almost double oil imports, according to data from China’s customs agency.

In 2014, the Chinese Ministry of Industry and Information Technology created a fund to invest in the semiconductor industry. In November, China’s National Integrated Circuitry Investment Fund (IF) purchased a 6.15 percent stake in Goodix, a leading provider of fingerprint sensors on the Chinese market for 2.8 billion yuan (US$429M). Ever since, Shenzhen, China-based Goodix (Swedish-based Fingerprint Cards’ biggest Chinese rival), has been gaining market share.

Under China’s national strategic blueprint for its integrated circuit (IC) industry, Chinese firms are expected to double their market share to 40 percent by 2020 from 20 percent last year, and to 70 percent by 2025.

The Korea Herald on November 7 quoted professor Wei Shaojun, dean of the department of micro- and nano-electronics at Tsinghua University — who is also known as a “semiconductor tutor” to Chinese President Xi Jinping — said, “It may be possible for China to step closer to first-tier technologies by 2035.”

Although China has been the world’s largest IC market since 2013, Shaojun said China’s semiconductor strategy is “not a threat to the world market.”

“It is just a new normal,” he said, explaining, “China’s booming IC industry will give everybody an opportunity for collaboration.”

There’s no doubt the global market for semiconductors is proliferating, bolstered by a dramatic increase in connected devices such as wearables and the Internet of Things. As part of this development, China’s IC industry has been expanding, aided by government-supported financing platforms and a favorable policy environment.

According to China’s strategic IC strategy, the average annual growth rate of IC industry sales will exceed 20 percent, with Chinese semiconductor companies expected to reach technological parity with global players by 2035.

Meanwhile, major Chinese companies are strengthening their know-how and production capabilities within semiconductor application areas such as fingerprint sensor technologies dominated by Fingerprint Cards, Goodix, and Synaptics.

China’s IC fund’s investment in Goodix is changing the game, however. Chinese companies such as Huawei, which purchased semiconductors and technology such as fingerprint sensors for mobile phones, are reluctant to depend on foreign suppliers. Foreign semiconductor companies such as Swedish biometrics technology manufacturer Fingerprint Cards, are losing market share.

Potential Chinese investors in Fingerprint Cards though may be getting cold feet. On the same day as the announcement about the IC fund’s investment in Goodix, a Beijing-based Watertek Information Technology official stated on November 24 it had no interest in acquiring Fingerprint Cards.

Nevertheless, according to the Swedish financial publication, Dagens Industri, Watermark Chairman Jiangtao Chen previously expressed interest in acquiring Fingerprint Cards through Hong Kong Zhongyuan Capital Company (HKZCC), a Hong Kong-based company he controls.

Fingerprint Cards probably should have accepted the offer while it was still on the table. Time is not on its side if it decides to go it alone in the Chinese market.

DISCLAIMER: BiometricUpdate.com blogs are submitted content. The views expressed in this blog are that of the author, and don’t necessarily reflect the views of BiometricUpdate.com.

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