China’s Memory Ambitions

China’s Memory Ambitions

China has detailed an investment plan and an organizational structure to create an important presence in the memory chip market. With its phenomenal resources and its centrally-planned economy the country is very likely to successfully penetrate the market to the detriment of today’s current suppliers. This report details the plans of the Chinese government, and explains how when and why the memory chip business will respond to China’s existing plans.

Executive Summary
Why China? Why Now?
China’s Role in Semiconductors
China as a Chip Consumer
China as a Supplier
Why China Originally Pursued a Foundry Strategy
Why Commodity Memories Now Appeal
China’s Enormous Foreign Exchange Reserves
How Currency Pressures Add Urgency
The Historical Impact of Similar Investments
Japan in the Late 1970s
Korea in the Middle 1980s
Taiwan in the Late 1990s
Successful Strategies for Memory Market Entry
Past China Investments and their Impact
Typical Investment Patterns
Some of China’s Past Strategic Investments
LCD Panels
How China Invests
The Tsinghua Organization
National Semiconductor Industry Investment Fund: “Big Fund”
Local Funds
Managing Foreign Investors
How China Chooses Investment Targets
Regional Special Interests
Structure of Businesses
International Trade Issues
The US and the ITC, DOC, and CFIUS
The European Community
China’s MOFCOM
Trade War
A Danger of Sanction Misuse
Intellectual Property
Why China Has Struggled in the Past
Government’s Direction of the Business
The Role of Political Cronyism
Market Share Focus
Recommendations for Future Success
China’s Impact Upon the Semiconductor Cycle
Standard Commodity Cycles with Organic Investments
The Three Phases of Semiconductor Price Cycles
Onset of an Overcapacity
Ongoing Overcapacity
Why Semiconductor Cycles are Memory-Driven
The Impact of External Investment
How China’s Investment Will Impact the Semiconductor Cycle
If China Ramps During a Shortage
If China’s Ramp Coincides with the Onset of an Oversupply
If China Ramps During an Ongoing Oversupply
An External Investment Lengthens the Cycle
Likely Outcome to Existing Semiconductor Suppliers
A Forecast Based on this Methodology
What a China Memory Company Means to Various Others
Competing Memory Chip Makers
Other Semiconductor Makers
Tool Suppliers
Global Investors
Likely Impact upon the Memory Chip Business
Likely Impact upon the Global Semiconductor Business
Further Reading
Jim Handy

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