GSA Forum: China lacks pre-requisite for semiconductor success

China is looking for self-sufficiency in ICs but lacks a fundamental pre-requisite for growing a chip industry.

Wally Rhines, CEO Mentor Graphics

“China is not encouraging freedom of thought and that’s something you need if you want innovation,” Wally Rhines, CEO of Mentor Graphics, told this week’s GSA European Executive Forum in Munich.

China has a $23 billion government fund being managed by private equity funds which are putting in another $97 billion, so there’s $120 billion waiting to be invested, said Rhines.

But other delegates to the Forum said that fabs are being built in China without products to fill them or process technology to run in them.

Willy Wang, CEO of Jiangsu Changjiang Electronics Technology (JCET) said that the gap between China’s usage of ICs and production is growing.

Wang said that the difference between today’s IC stimulus plan and the plan in 1990 is that the 1990 fund was only $1 billion and was managed by government officials and was not very successful while today’s fund is $120 billion and managed by the China Development Bank and fund managers.

Electronics Weekly asked Wang what China companies had to do to make their takeover bids for US and Taiwanese semiconductor companies more successful.

“I don’t think they handled that very correctly,” replied Wang, “they gave the impression of a hostile type of approach. It could be done differently. I think those guys will approach it differently in the future”.

Handel Jones, CEO of International Business Strategies, agreed: “They were seen as predatory. I think jv is the right way to go. That way companies get access to the China market.”