As the red carpet was rolled out for the historic state visit by China’s president, Xi Jinping, last week David Cameron insisted that it heralded a new ‘golden era’ in the UK’s relationship with China, something he has repeatedly talked up.
By contrast, China’s relationship with the US has been marked by tensions over security and there has been talk of sanctions being imposed on Chinese ‘agencies’ found to be involved in cyber-attacks.
As China embarks on radical reforms to its semiconductor industry those tensions could be just scratching the surface of what could come.
China is by far the world’s largest consumer of semiconductors and accounts for around 45 percent of worldwide demand for chips, but is almost totally dependent on imported integrated circuits.
With an ever widening consumption and production gap the Chinese government has significantly accelerated the development of its own semiconductor industry, promoting the development of domestic IC design and production.
The growth of China's semiconductor industry offers tremendous opportunities for multinational companies. Qualcomm, for example, has played a not insignificant part in the development of China’s semiconductor industry, firstly through its partnership with Semiconductor Manufacturing International Corporation (SMIC) and more recently with its agreement to bring 14nm process technology to China in a joint venture with Imec, SMIC and Huawei.
Qualcomm described this deal as a win-win partnership that would strengthen the entire supply chain by connecting upstream and downstream companies with leading R&D and other resources.
We are also seeing a migration of design expertise to China, so much so that it will soon be expected to be influencing up to 50 percent of hardware designs globally.
China has realised that its semiconductor industry needs to partner with global technology companies to improve both the local talent base and supply chain.
Most top-tier multinational semiconductor companies have had little incentive to share their intellectual property or transfer technology to China, but for second-tier players this newly evolving ecosystem could prove a winner. With the cost of IC development soaring those companies with access to Chinese partners, especially those with deep pockets, will be better placed to compete.
Partnerships are certainly one option but, as the Chinese economy slows, there is the prospect of cheap money pouring out of the country looking for productive investment which could raise the prospect of acquisitions in Silicon Valley.
Can anything stop China dominating the global electronics industry?
Well one thing that has yet to be determined is how global governments will react. Will we be looking at a ‘golden era’ or a technological ‘cold war’?
