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Chinese CPU , IC and Operational Systems

Discussion in 'China & Asia Pacific' started by RMLOVER, Aug 30, 2017.

  1. RMFAN


    Sep 2, 2017
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    Chips All In: Investing in China’s Semiconductor Industry
    Posted on March 2, 2016 by China Briefing


    By Alexander Chipman Koty

    Over the next decade, China plans to invest up to RMB 1 trillion (US$161 billion) into its domestic semiconductor industry as it seeks to become a global power in the sector. In recent years, Beijing has repeatedly stated that developing its own integrated circuit (IC) industry is of integral national strategic concern. This aligns with government goals to become stronger in areas such as high-tech, research and development, and intellectual property (IP), as outlined in China’s 13th Five Year Plan covering the years 2016-2020.

    China’s overtures in this sector offer potential rewards for investors and producers of semiconductors, but considerable risks and obstacles as well. The necessity for large scale production and advanced research and development to compete and earn profits in this capital-intensive industry is a considerable hurdle to break through. Additionally, concerns over IP protection and cyber espionage add another layer of risk to the industry. A clear understanding of the industry and the government’s incentive structure is therefore essential for success.

    Snapshot of China’s Semiconductor Industry
    China is the world’s largest purchaser of semiconductors, accounting for 56.6 percent of global consumption in 2014. Its consumption market grew at an 18.8 percent compound annual growth rate from 2003 to 2014, compared to 6.6 percent worldwide. This is due in large part to its position as the world’s largest exporter of electronics, where the use of semiconductors is essential. However, over 90 percent of the semiconductors that China purchases are imported from foreign countries such as the United States, South Korea, Japan, and Taiwan. As a result, China spends more money importing semiconductors than it does oil.

    In order to shrink its sizable trade deficit, the Chinese government has set forth ambitious goals to reduce its reliance on foreign technology and to eventually become self-sufficient. Through its support of the domestic semiconductor industry, Beijing envisions 40 percent self-sufficiency by 2020 and 70 percent by 2025. This is part of China’s wider ‘Made in China 2025 Policy’, which aims to not only produce goods in China, but to transform the reputation of its products from cheap, unreliable, and unimaginative to precise, high quality, and innovative. Ultimately, the Chinese government aspires for its home-grown companies to be tier-1 industry leaders by 2030.

    [​IMG]RELATED: Pre-Investment and Entry Strategy Advisory from Dezan Shira & Associates
    Government Incentives

    The semiconductor industry in China was fundamentally transformed in 2000 as part of the government’s 10th Five Year Plan. Semiconductor companies – which were entirely state-owned – were privatized and the sector was classified as an encouraged industry for foreign investment. State Council Rule 18 introduced several tax incentives to spur growth in the industry in June 2000. While the industry grew over the following decade, its development failed to meet lofty government expectations. Foreign companies’ concerns over China’s lack of IP protection, combined with government support spread too thinly across multiple industries, contributed to the less-than-expected results.

    The policies of State Council Rule 18 were revised and built upon in State Council Rule 4, released in February 2011 and valid through 2017. Notable points include:

    • Continuation of preferential value-added tax for software products;
    • Business tax exemption for qualified software makers and IC design firms when engaging in software development and testing, information system integration, IC design, consulting, and operation and maintenance;
    • Two-year exemption and three-year half exemption or five-year exemption and five-year half exemption on enterprise income tax for IC manufacturers who meet particular design and/or investment targets;
    • Two-year enterprise income tax exemption followed by three-year half exemption for new IC design firms and qualified software enterprises launching in China;
    • Reduced 15 percent and 25 percent tax rates for IC manufacturers who meet particular design and/or investment targets; and
    • Preferential enterprise income tax for qualified companies engaging in IC packaging, testing or manufacturing of special materials, and manufacturers of special IC equipment.
    The policies found in State Council Rule 4 differ from previous incentives in several ways. Firstly, tax incentives extend to backend testing, assembly, packaging, and specialized material and equipment companies. Secondly, there is greater emphasis on rewarding profit-making firms. By doing so, the government encourages mergers and acquisitions for successful companies to consolidate and grow by purchasing smaller and less profitable ones. Thirdly, there is a clear effort to encourage high-tech research and development. The government offers greater benefits to companies that meet high technological standards, incentivizing domestic innovation and making products more globally competitive.

    There is a notable lack of support for discrete semiconductors in favor of more complex ICs as the former sector is seen as low-tech. Finally, Beijing is adopting a more market-based approach by having government investments in the industry managed by private equity firms and overseen by investors rather than run directly by the government itself.

    Mergers, Acquisitions, and Partnerships
    Mergers, acquisitions, and partnerships have been on the rise globally in an environment of slowing growth and rising costs for semiconductors, and Chinese companies have been particularly aggressive. In 2013, Tsinghua Unigroup, a government-affiliated private equity firm, purchased the Chinese mobile chipmaker Spreadtrum and RDA Microelectronics for a combined US $2.7 billion. Intel later bought a 20 percent stake in the two companies for US $1.5 billion, and is poised to invest another US $5.5 billion in manufacturing semiconductors in China. Other chipmakers, such as Qualcomm and NXP, have established joint ventures with Chinese companies, and the former also established a China investment fund.

    While China is dependent on foreign companies for its semiconductors, foreign companies are also dependent on China to provide a market. For instance, about half of Qualcomm and NXP’s revenue and 20 percent of Intel’s comes from China. As a result, many foreign companies are sharing technology and forming partnerships with Chinese companies to avoid being left out of the Chinese market. Through partnerships, joint ventures, and mergers and acquisitions, Beijing envisions its domestic companies acquiring the technology and expertise they need to become dominant global players.

    This strategy has raised the suspicions of the U.S. government, however. In February 2016, Tsinghua Unisplendour, an affiliate of Tsinghua Unigroup, dropped a US $3.8 billion agreement to buy 15 percent of the American company Western Digital after the Committee on Foreign Investment in the United States (CFIUS) opted to investigate the deal. CFIUS has the power to block international deals deemed detrimental to American security interests. This surprised many observers, who did not expect any interference with a minority deal in a relatively low-tech company. Earlier that month, Fairchild Semiconductor, which holds multiple U.S. government contracts, rejected a US $2.46 billion Chinese bid in favor of a lower offer from an American company, likely due to concerns over CFIUS. Similarly, dynamic random access memory chip manufacturer Micron Technology, whose chips are used in U.S. weapons systems, rejected an informal US $23 billion offer from Tsinghua Unigroup on the presumption that it would be blocked by CFIUS due to national security concerns.

    These failed deals highlight the difficulties that Chinese companies may experience with foreign governments unwilling to share technology essential for national security, and holding concerns over Chinese cyber espionage, to go along with longstanding skepticism over IP protection in China.

    Key Takeaways
    The Chinese government appears committed to developing its domestic semiconductor industry, offering significant capital and various tax incentives to IC producers. In the long term, discerning investors may reap the benefits of Beijing’s support as it strives to become a global power in the industry. Meanwhile, existing producers can continue to see China as an affluent market for its goods, though increasingly at the cost of technology and licensing. However, the capital-intensive nature of the semiconductor industry, its emphasis on costly research and development, and the necessity for increased IP protection, are significant obstacles for China. Combined with the potential for the industry to become highly politicized, there is no guarantee that Beijing will achieve its ambitious goals.
  2. RMFAN


    Sep 2, 2017
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    China Unveils Memory Plans

    Government and industry are investing tens of billions of dollars, but so far results are mixed.

    Backed by billions of dollars in government funding, China in 2014 launched a major initiative to advance its domestic semiconductor, IC-packaging and other electronic sectors. So far, though, the results are mixed.

    China is making progress in IC-packaging, but the nation’s efforts to advance its domestic logic and memory sectors are still a work in progress. In fact, China has yet to achieve its goal of closing the technology and trade gap with foreign chipmakers.

    The government isn’t throwing in the towel, however. On the contrary, it continues to invest in the semiconductor sector, and now it appears to be putting its emphasis on one area in particular—memory.

    The nation’s memory efforts are being expanded on two fronts. On one front, three multinational companies—Intel, Samsung and SK Hynix—are expanding their memory production in fabs within China. On a second front, China hopes to get its own domestic memory sector off the ground, and for good reason. It must obtain or import the vast majority of its chips from foreign suppliers, creating an enormous trade gap in the arena.

    To help jumpstart its domestic memory efforts, China has attempted to acquire multinational memory makers or to form technology alliances with them. So far, most of the multinationals have balked, citing national security and intellectual-property concerns, or their governments have stepped in to stop the deal. The Committee on Foreign Investment in the United States (CFIUS) has been active in blocking Chinese investments, according to numerous industry sources.

    While China continues to look for partnerships, several domestic memory makers have emerged. Here’s the latest activity in China:

    • In December, China unveiled a $24 billion memory project in Wuhan, the capital of the Hubei province in central China. Yangtze River Storage Technology (YRST), which is spearheading the project, hopes to build 3D NAND fabs. YRST itself is backed by China’s Tsinghua Unigroup, a state-run company.
    • Tsinghua Unigroup has a separate DRAM and 3D NAND fab project in Nanjing. The total investment is over $30 billion in that project, making its total investment in the memory segment at a whopping $54 billion, at least for now. In addition, Tsinghua Unigroup also recently acquired a memory design house in China.
    • China’s Jinhua Integrated Circuit Co. (JHICC) recently broke ground on a new DRAM fab. JHICC obtained its DRAM technology from Taiwan’s UMC.
    • GigaDevice, a Chinese flash design house, is trying to get a memory fab venture off the ground.

    Not all projects will become a reality, though. Sino King Technology, which is led by the former chief executive of Elpida, has suspended its efforts to start a memory company in China.

    All told, in memory, China is starting from nearly scratch. Consequently, it won’t be easy to get a domestic memory industry off the ground. “It won’t happen in the short term,” said Risto Puhakka, president of VLSI Research. “China has the capital, but they lack the skill level and IP.”

    Still, China is moving full speed ahead in both memory and logic. In fact, semiconductor technology and manufacturing are playing a big role in one of the nation’s major initiatives, dubbed “Made in China 2025.” Launched in 2015, the goal of this effort is to upgrade and increase the domestic content of components in key industries.

    “China is becoming a leading consumer of electronics, but they’re not yet producing much of the semiconductor components for those electronics systems,” said David Fried, chief technology officer at Coventor. “It just makes sense for them to bring that semiconductor production inside to satisfy consumer demand. So they’re going to invest a lot in logic and memory to bring up advanced technology nodes. And they are going to try to do it fast.”

    Playing catch-up
    China’s IC efforts are fueling a wave of fab activity in the nation, creating a boom in the equipment industry. In total, wafer fab equipment (WFE) sales in China are expected to reach $7 billion in 2017, compared to $6.7 billion in 2016 and $3.4 billion in 2013, according to SEMI. In total, the worldwide WFE market is projected to reach $43.4 billion in 2017, up 9.3% over 2016, according to SEMI.

    Fig. 1: Semiconductor equipment sales. Source: SEMI

    Amazingly, China’s WFE market hasn’t reached its peak. “Right now, it looks like 2017 fab equipment spending in China is going to be roughly the same as 2016, but it’s up a pretty significant amount from where it was a couple of years ago,” said Arthur Sherman, vice president of marketing and business development at Applied Materials. “We think 2018 spending could be meaningfully up above the 2017 forecast.”

    Others agreed. “As best we can tell, there are up to 20 active projects that we are focused on tracking in China,” said Martin Anstice, president and chief executive with Lam Research, in a recent conference call. “The spending or at least the significant spending is more likely to be a calendar 2018 statement than calendar 2017.”

    Although China’s domestic IC sector is moving at a fast pace, the Chinese government has been grappling with the same problem for years. It is behind in semiconductor technology. This is a complex subject, but one of the causes is export controls. Multinational companies sell products into China, but they must follow various export control policies. Originally hatched during the Cold War period in the 1950s, export controls were established to limit technologies that could have potential military use.

    As part of those controls, multinational fab equipment makers for years were prevented from shipping advanced tools into China (and other nations) that were capable of processing chips at 0.25 microns and below. On top of that, China also lacked IC know-how, so it fell behind in semiconductor technology.

    Today, there are still export controls in China, although the regulations have been eased in some but not all areas. Generally, equipment makers can now ship more advanced tools into China. But it’s hard to play catch-up in semiconductors. So over the years, China has unveiled several initiatives to advance its IC industry. The country has made some progress, but every plan has fallen short of expectations.

    Then, in 2014, China launched an initiative called the “National Guideline for Development of the IC Industry.” The goal is to accelerate China’s efforts in 14nm finFETs, advanced packaging, MEMS and memory.

    At the time, China created a $19.3 billion fund, which would be used to invest in its domestic IC firms. And over the next decade, it could spend $100 billion across China’s IC sector.

    China launched these efforts for various reasons. First, it hopes to close the technology gap with foreign chipmakers. Second, China consumed 44.2% of the world’s chips in 2016, according to Gartner. Yet, its chipmakers produce only a small fraction of the world’s ICs.

    Finally, China produces an inordinate amount of the world’s electronic products. “But right now, China must import 80% to 90% of its chips from other countries,” said Linyong “Leo” Pang, chief product officer and executive vice president at D2S. “From the Chinese government point of view, it’s a very simple solution. ‘Let’s make those chips in China so we don’t have to import them.’”

    Over time, China has been ramping up its fab capacity, as the nation consumes more of the world’s chips. “China is becoming a big market,” said Gary Patton, chief technology officer at GlobalFoundries. “You can see there is a move to get more production inside China.”

    In total, China produced 7.8% of the world’s IC in 2009, but that figure grew to 12.7% in 2015, according to IC Insights. By 2020, China is expected to make 20.9% of the world’s chips, according to IC Insights.

    All told, China’s new strategy is much different than past efforts. “The Chinese government is actively attempting to reshape the domestic semiconductor market with significant capital from both government and private sources and to assist local companies in becoming key players in the global semiconductor market,” said Joey Tun, principal marketing development manager at National Instruments (NI).

    “Although this is not the first time the Chinese government has taken on propping up the domestic semiconductor industry, though with limited success in previous times, both the scale and breath of this effort points to significant opportunities and long-term implications for multinational companies,” Tun said.

    So what is China’s strategy? Basically, China hopes to develop its own technology. If it doesn’t have the know-how, it will simply acquire a company to obtain the technology.

    One of China’s first big moves was in IC packaging. In 2014, JCET, China’s largest IC packaging company, acquired Singapore’s STATS ChipPAC, a move that put China in the upper echelon in the arena.

    Then, China focused on logic. The nation boasts a sizable number of fabless design houses. But for leading-edge chips, China’s design houses must rely on the multinational foundries. China itself has a number of foundry vendors, but the most advanced process among the local companies is 28nm planar.

    Hoping to advance its logic technology, SMIC, Huawei, Imec and Qualcomm in 2015 formed a joint R&D venture in China. The venture plans to develop 14nm finFET technology by 2020.

    Not all of the action is at the leading edge, however. For example, SMIC, China’s largest foundry vendor, recently raised its capital spending, primarily due to strong demand for more mature processes like 65nm and 55nm.

    The demand is fueled by several chip applications in the China market, such as digital TVs, set-top boxes and RF. “We’re seeing companies in China trying to position themselves to play in the IoT space,” said Walter Ng, vice president of business management at UMC.

    Seeking to get a piece of the action, GlobalFoundries, TSMC and UMC are building new fabs in China. For example, UMC recently opened a 300mm joint venture fab in Xiamen, China. Initially, the fab will produce 55nm and 40nm chips.

    “We are seeing good demand for 40nm,” Ng said. “The initial volumes in that fab are going to be taken by existing customers due to demand. Over time, a good part of that capacity will be taken up by some of the more well-known domestic players.”

    Meanwhile, China also is ramping up its memory capacity. The nation’s memory business is divided into two categories—the multinationals and the domestic players.

    In 2006, SK Hynix was one of the early multinationals to build a memory fab in China. Today, SK Hynix’ Wuxi-based fab represents about half of its total DRAM output. The company plans to expand that fab with an investment of $808 million.

    Then, in 2014, Samsung began ramping up its new 300mm fab in Xi’an, China. This fab, which is producing 3D NAND, recently expanded from 20,000 to 30,000 wafer starts per month, according to Pacific Crest Securities.

    Samsung is also expanding its 3D NAND production in fabs within Korea. “For NAND, overall demand will increase due to content growth in all applications,” said Chun Sewon, senior vice president of memory marketing at Samsung, during a recent conference call.

    Intel, meanwhile, converted its China fab from 65nm chipsets to 3D NAND in 2015. Today, Intel is shipping 3D NAND from its Dalian-based fab.

    Fig. 2: China’s manufacturing spending is on the rise. Source: SEMI

    Who is YRST?
    Still, the multinationals can only produce a tiny percentage of China’s memory needs, prompting the government to jumpstart its own 3D NAND and DRAM efforts.

    For this, China needs technology and expertise. To obtain the know-how, Tsinghua Unigroup and other Chinese firms are recruiting former chip executives from Taiwan and elsewhere. “The challenge is that everything is new. You need new facilities, processes and technology,” said Greg Wong, an analyst with Forward Insights. “This is why they are trying to attract some experienced people.”

    Ganming Zhao, chief technology officer for Applied Materials’ China unit, added: “Memory suppliers face challenges, including ensuring they have advanced technology knowledge, experienced technical talent and leading technology partnerships. Current heavy IC investment in China should make funding less of a concern.”

    China started the ball rolling with Wuhan Xinxin Semiconductor Manufacturing Corp. (XMC). Founded in 2006, Wuhan-based XMC is a NOR flash foundry vendor. In addition, XMC has been developing 3D NAND as part of an alliance with Spansion, now part of Cypress.

    Last year, Tsinghua Unigroup acquired a majority stake in XMC. Then, XMC was moved under a new group called YRST. Tsinghua Unigroup owns roughly 50% of YRST. The other portion is owned by China’s National Integrated Circuit Industry Investment Fund.

    Under its new parent, XMC will continue to focus on the NOR foundry business, according to company officials, but XMC will no longer pursue 3D NAND.

    Instead, YRST will develop 3D NAND. As part of that plan, the government recently announced a new $24 billion memory project in Wuhan. Led by YRST, the entity hopes to build at least three 3D NAND fabs.

    China is focusing on 3D NAND for good reason. Today’s planar NAND is nearing its physical limit, thereby requiring a new technology—3D NAND. That technology resembles a vertical skyscraper. It consists of multiple layers, which are stacked and then connected using tiny vertical channels.

    But 3D NAND is a difficult to make. YRST is working on its own 32-layer 3D NAND device, according to sources, but the yields are low. It’s unclear if it is still developing the 3D NAND technology from Cypress/Spansion.

    Regardless, China will struggle in 3D NAND. “Looking at the struggles that the current NAND players have had in developing their 3D NAND, it may take longer than expected (for YRST to make 3D NAND),” Forward Insights’ Wong said.

    Besides the 3D NAND effort, Tsinghua Unigroup has a separate fab project in Nanjing, the capital of China’s eastern Jiangsu province. The goal is to build 3D NAND and DRAM fabs. The details of this project are sketchy.

    Tsinghua Unigroup has a separate subsidiary, dubbed Unigroup Guoxin. Last year, meanwhile, Unigroup Guoxin acquired a controlling interest in Xi’an UniIC Semiconductors, an IC memory design house.

    But will Tsinghua Unigroup succeed in its efforts to make 3D NAND and DRAM? “They have the capital, but they lack the infrastructure and most of the IP know-how,” said Alan Niebel, president of Web-Feet Research. “Their main hope is to enter into a joint venture with Intel/Micron, where they could utilize some of the process IP and production know-how. If they can get the right IP through a JV, acquisition or other means, they might have a chance. But this is a five-year play or longer. Otherwise, they will try to build chips (on their own). This will take more time and more use of knowledgeable people and partners.”

    JHICC and Hefei ChanGxin
    There are other memory efforts in China, such as JHICC. The DRAM hopeful is based in Jinjiang City in the Fujian province in southern China. Its investors include Fujian Electronics & Information and Jinjiang Energy Investment.

    JHICC plans to invest $5.65 billion to build a new 300mm fab. Initially, it will develop DRAMs at the 3xnm node. It obtained the technology from a licensing and R&D alliance with UMC. UMC isn’t involved with JHICC’s fab operations, however.

    “JHICC may have more of a chance for success, because they will focus on specialty DRAM production and the niche DRAM market,” said Alex Yang, an analyst with the Market Intelligence & Consulting Institute (MIC), a market research firm in Taiwan. “JHICC hopes to avoid the competition from the leading memory companies, such as Samsung, SK Hynix and Micron.”

    Meanwhile, details are sketchy about another memory hopeful—Hefei ChanGxin. This company is a joint venture between GigaDevice and the Hefei City Government. The plan, according to MIC’s Yang, is to build a memory fab in Hefei, the capital of the Anhui province in eastern China.

    In another twist, GigaDevice plans to acquire Integrated Silicon Solution Inc. (ISSI) from China’s Uphill Investment, sources said. In 2015, Uphill acquired ISSI, a U.S.-based specialty DRAM maker. ISSI declined to comment.
  3. RMFAN


    Sep 2, 2017
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    In the global semiconductor market, China has been viewed as a customer-rich end market and the “world’s factory” for a long time. In 2013, China’s semiconductor consumption market grew by 10.1% to reach a new record of 55.6% of the global market.

    2013, China’s semiconductor consumption market grew by 10.1% to reach a new record of 55.6% of the global market.

    It is said that today China spends about $37 billion to import ICs, which is the same amount they spend on crude oil. The exceptional growth of the semiconductor industry in China is likely to continue for the next decade. However, the landscape of China’s semiconductor industry is expected to change considerably, which will bring opportunities to the global semiconductor industry. Some of the changes are:

    Change No.1 Market-driven Policy:
    In China, The National IC Industry Investment Fund is a new approach to attract private investors to support different segments in the IC industry such as design, manufacture, and packaging. The fund will be managed based on a market-driven approach. Investors who demand tangible results and real returns on investment will oversee the funds to invest in fables, foundries, and/or research institutes within China. The central government of China has budgeted about $48.3 million to set up this fund and local governments are expected to follow this trend to form smaller funds in their region to support the specialized area of the IC industry. The abundant resources in China and the strong determination of policy makers to develop an extensive IC industry in China shows that China is planning to be more than just the “world’s factory”.

    Change No.2 International Cooperation in R&D:
    Recognizing that partnership with global technology companies is a great way to advance technology and the talent pool for local Chinese companies. A recent example is SMIC (Semiconductor Manufacturing International Corporation), Huawai, imec and Qualcomm have joint investment on SMIC’s new company focuses on research and development. This new company will help to facilitate a closer cooperation between upstream and downstream companies, leading edge R&D, and other synergies in the industry’s global eco-system. The goal of the partnership is to develop 14 nanometer CMOS technology for mass production and it is expected to facilitate the mass production of 16/14nm ICs by 2020.

    Change No.3 Merger and Acquisition:
    Another area where the investments from China are likely to impact the global IC industry is in mergers and acquisitions, especially international deals. Not long ago, Uphill, a Chinese investment firm, which specialized in the IC industry, bought ISSI after a long battle with Cypress. In addition, the rumor of Tsinghua Unigroup, a state-owned high-tech company of China, is proposing to buy Micron with $23 billion was on many news sites earlier this week. If the deal goes through, it would be the largest Chinese takeover of a U.S. company. For semiconductor technologies, which require a lot of investment, it would be very difficult for Chinese players to build a complete and competitive industry within the value chain. With all the ongoing mergers in the global semiconductor industry, it would not be a surprise to see more players with Chinese names.

    The size of the Chinese market is too large to ignore. Any changes, even a minor one, will cause a chain reaction on a global scale. In the semiconductor industry, the changes that are happening in China are definitely going to impact the industry on a broader level.

    For investors, with the government-backed investment plan into China’s major semiconductor industries, there are a lot of potential opportunities for potential investors to capital on. For OEMs, there will be more options on chips to use. For EMS companies, closer distances between the manufacture and chip companies allows for a possible savings in operation, taxes and shorter lead-times. For distributors, the opportunity comes with the distribution of chips that are manufactured in China globally.

    With the size and multiple layers of the Chinese semiconductor market, it is hard to generalize a strategy that will fit all stakeholders’ needs and visions. At Advanced MP Technology, our already established offices and warehouse in Shanghai and Shenzhen, our global distribution network, and our extensive industry connection allows us to be ready to support customers and suppliers in the greater China region with the valuable service.
  4. RMFAN


    Sep 2, 2017
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    Computer-Chip Testing Firm Urges Blocking Sale of Rival to China Fund -- Update

    By Kate O'Keeffe and Eva Dou Published August 15, 2017 Features Dow Jones Newswires

    The battle between the U.S. and China over computer-chip makers has expanded to a new front: the companies that test the technology.
    Citing national-security concerns, a U.S. semiconductor-testing company, Cohu Inc., is mounting a quiet campaign to derail the planned $580 million sale of an American rival, Xcerra Corp., to a Chinese state-backed group, according to documents reviewed by The Wall Street Journal.

    The U.S. government has previously shot down attempts by Chinese interests to buy makers of the chip technology used in mobile phones, military equipment and other systems. The deal for Xcerra, which provides equipment to test chips but doesn't actually make them, could test how far the Trump administration is willing to go to shut China out of the sensitive sector at the heart of a trade battle.

    The U.S.'s cutting-edge semiconductor technology powers the industries that make the country the world's most formidable superpower, including the military, Silicon Valley and Wall Street. As China continues its rapid development, it, too needs a top-notch chip industry, and it has announced plans to spend $150 billion to get it.

    The effort by Cohu is aimed at blocking one deal in which its competitor could gain a financial advantage through an influx of Chinese money. But on a larger scale, it provides a window into the myriad economic and national security considerations the U.S. is juggling as it confronts a powerful new rival in the global chip market.

    Chinese officials and executives say the national security concerns their U.S. counterparts raise are a pretext and that the U.S. is simply trying to stave off competition.

    Poway, Calif.,-based Cohu recently sent its analysis of the risks associated with the proposed sale of Norwood, Mass.-based Xcerra to the Chinese to the Committee on Foreign Investment in the U.S., a multiagency panel that vets deals for national-security concerns, according to the correspondence reviewed by the Journal. The committee, known as CFIUS and led by the Treasury Department, can approve the acquisition or recommend the president block it.

    The deal, announced in April, could give China access to intellectual property that could accelerate its efforts to become a serious player in the industry, Cohu alleges in a six-page white paper it sent to a Treasury official handling CFIUS matters.

    "If Xcerra becomes a Chinese state-owned enterprise and obtains top-tier semiconductor companies like Qualcomm, Broadcom and Texas Instruments as customers, it is reasonable to expect transfer of this critical information to Chinese semiconductor companies," the document says.

    Xcerra, in a statement, said: "The allegations Cohu make are false, as Xcerra does not possess critical [intellectual property] from any customer." Both parties in the deal intend to cooperate fully with CFIUS "to address any potential national security interests," Xcerra said.

    Cohu didn't respond to requests for comment.

    A Treasury spokesman said the agency doesn't comment on whether any particular transaction is being reviewed by CFIUS.

    The deal's primary financier is a $20 billion Chinese government-controlled fund called the China Integrated Circuit Industry Investment Fund Co., known locally as "the Big Fund." A representative declined to comment.

    Cohu's June 2 paper also says a sale of Xcerra could disrupt the semiconductor supply chain and lead to U.S. job losses if the company uses subsidies from its new owner to improperly undercut U.S. rivals.

    Some U.S. officials warn that, for example, China could use state subsidies to drive U.S. chip firms out of business and eventually dominate the industry, leaving the U.S. and its military reliant on Chinese chips. Others, though, say it is critical for CFIUS to focus solely on traditional national-security matters, and that taking economic concerns into account would be wrongly protectionist. President Donald Trump has ramped up trade pressure on China, directing aides on Monday to begin a study of whether to launch a formal investigation into whether Beijing is unfairly acquiring patents and licenses from U.S. firms.

    U.S. scrutiny of China's chip ambitions and Chinese deals generally has been building. In December, after a CFIUS investigation, then-President Barack Obama blocked a Chinese investment fund's purchase of German semiconductor-equipment supplier Aixtron SE, which has U.S. assets. In January, an Obama administration advisory panel warned of economic and military dangers posed by China's 10-year, $150 billion effort to build a cutting-edge semiconductor sector.

    During the Trump administration, CFIUS has thrown a number of high-profile takeover bids by Chinese firms into question, and lawmakers and the Treasury are weighing changes that could make the review process even tougher.

    Some say the fight has become overly politicized. Ray Bingham, a partner at Canyon Bridge Capital Partners Inc., a Palo Alto, Calif.-registered private-equity firm funded by the Chinese government, said in a recent interview that politics "more than anything" was behind CFIUS's scrutiny of his firm's $1.3 billion attempt to buy Lattice Semiconductor Corp., a U.S. firm. Canyon Bridge's structure raised red flags with a bipartisan group of 22 House lawmakers led by Rep. Robert Pittenger (R., N.C.), who accused the firm of initially trying to obscure its state backing, which it has denied.

    Cohu, in a follow-up letter dated Aug. 8, urged CFIUS to scrutinize the Chinese financing behind Xcerra's deal following Xcerra's Aug. 7 disclosure to the Securities and Exchange Commission that it had changed.

    Under the new deal structure, local government funds from China's Fujian and Hubei provinces also will help finance the purchase, Chinese corporate records show.

    Xcerra said in its statement that, according to the terms of the deal, its buyer had a right to syndicate its financing. "This change had nothing to do with filing with the Committee on Foreign Investment in the United States," it said.
  5. RMFAN


    Sep 2, 2017
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    China building world’s biggest quantum research facility

    Centre could boost military’s code-breaking ability and navigation of stealth submarines

    PUBLISHED : Monday, 11 September, 2017, 8:46am
    UPDATED : Monday, 11 September, 2017, 1:38pm



    The National Laboratory for Quantum Information Science will be located on a 37-hectare site next to a small lake in Hefei, Anhui province. Some time this month developers will be invited to bid for a contract to construct the site, according to an article in Hefei Evening News, a daily newspaper run by the city government on Thursday.

    Pan Jianwei, China’s lead quantum scientist who was playing a key role in the project, told local officials at a briefing in May that technology developed in the facility would be of immediate use to the armed forces, according to Anhui Business Daily newspaper.

    Quantum metrology, which measures small variations in physical parameters such as gravity with unprecedented accuracy, could significantly improve submarines’ stealth operations.

    A submarine with a quantum navigation system could operate underwater for more than three months without the need to surface for positioning satellite signals.

    Chinese city to launch ‘unhackable’ quantum network

    After operating for 100 days underwater the captain would still be able to pinpoint the vessel’s position in the Pacific Ocean with a margin of error of just a few hundred metres according to Pan, who could not be immediately reached for comment.


    Another key mission of the laboratory is to build the nation’s first quantum computer that could break an encrypted message in seconds.

    “Our plan is that by 2020, or maybe as soon as next year, to achieve ‘quantum supremacy’ with calculation power one million times to all existing computers around the world combined,” Pan was quoted as saying by Anhui Business Daily, which is run by the provincial government.

    It was unclear whether the computer could be used for code-breaking.

    Construction work is expected to finish in 2 ½ years with a budget of 76 billion yuan (HK$91.6 billion).

    Chinese satellite makes breakthrough in quantum communication

    Ground-clearing work started with approval from the central government in February, according to the website of the Chinese Academy of Sciences, the owner of the new facility.

    Guo Guoping, a quantum information researcher at the Chinese Academy of Sciences in Hefei, said a general-purpose quantum computer could take many more years or even decades of effort.

    Building a large facility with centralised resources could accelerate this process by pulling together the talents of scientists from all over the nation with knowledge and experience of multiple scientific disciplines to overcome a wide range of technical and engineering hurdles, he said.

    Guo stressed that in the national laboratory, researchers’ performance should not be evaluated by the scientific papers they published but by their contribution to specific project targets, such as building a general-purpose quantum computer.

    “This may sound a bit old-fashioned, even Soviet-style, but it can give China a chance to win the race,” he added.

    China moved a step ahead with the launch of a quantum satellite last year and conducted a series of cutting edge experiments such as quantum entanglement and teleportation in space.

    Last month the world’s longest and most sophisticated quantum key distribution network for ultra-secure communication between Beijing and Shanghai was successfully tested and deemed ready for official deployment in the military, government and financial sectors.

    Guo said the field had advanced rapidly, but the delivery of a code-breaking machine by 2020 was “highly unlikely”.

    Over the next few years, researchers from around the globe may be able to develop primitive quantum computers to deal with some specific tasks.

    They could, for example, simulate the movement of particles at a subatomic level to solve some physical problems that might help develop new materials or drugs.

    But these are not general-purpose computers capable of code-breaking, Guo added.

    Some scientists have questioned the government’s enormous bet on quantum technology. Critics have warned that spending more taxpayers’ money on quantum research will only result in less funding for other disciplines.

    A professor at Beijing University of Posts and Telecommunications, a major information technology research institute, said some computer scientists and cyber security researchers were worrying about their jobs.

    “I have known some researchers whose funding applications were turned down because their study was unrelated to quantum. I have also met officials who knew nothing about quantum physics but took the bait on quantum computers and networks as offering a solution to all problems,” said the professor on condition of anonymity.

    “They chose to ignore the fact that a quantum network can also transmit viruses, and a quantum computer today is slower than a hand-held calculator.”

    Yang Changli, a quantum technology researcher at the Institute of Physics at the Chinese Academy of Sciences in Beijing, said he had heard of the project in Hefei but would not consider moving there.

    “I have a family. They don’t like the idea of reallocation,” he said.

    Yang also ruled out the possibility of splitting his time between two cities. “I am a scientist, not business executive. My time should be spent in a laboratory not a jet plane,” he said.
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    Sep 2, 2017
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    The Third Generation Beidou Chip Released


    This is a domestic baseband and RF integration chip with fully independent intellectual property rights. developed by China Big Dipper Technology Co., Ltd. from Shenzhen. According to experts, this ultra-low power third-generation Beidou chip can reach sub-meter level positioning accuracy and achieve chip-level security encryption. In the future, the chip can be widely used in vehicle management, car navigation, wearable equipment, ship navigation, GIS data collection, precision agriculture, intelligent logistics, unmanned driving, exploration and survey.

    As a national strategic space infrastructure, China's Beidou satellite navigation system is not only of great significance to national defense security but also in the field of precision applications . According to statistics, 2016 satellite navigation and location services industry output value reached RMB 211.8 billion yuan, an increase of about 22.06% over 2015. Beidou contribution to the core industrial output value has reached 70%.

    On September 16th, the staff demonstrated a high-precision navigation and positioning chip that supported the new generation of Beidou III signal system. Xinhua News Agency (China Satellite Navigation and Orientation Association for map)

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    Huarui 1 with 65nm CMOS process, the work frequency is 550MHz, processing capacity of 32GFMACS, power consumption of 10W. In terms of technical indicators, Hua Rui 1 DSP performance is significantly better than Freescale's MPC8640D, ADI's TS201 and the United States Texas Instruments C6701. According to the research of Nanjing Institute of Electronic Technology, Huarui 1 has better performance than domestic and foreign counterparts, and is suitable for radar signal processing and electronic countermeasure with high real-time requirements.

    It is because of the excellent performance of Hua Rui 1, this DSP has been successfully applied to more than fourteen types of radar products, to create a domestic multi-core DSP chip product application of the "three of the most": radar equipment application models up, The largest number of single sets of applications and the largest number of applications.

    After the success of Hua Rui 1, China Electronics 14th institute made persistent efforts to successfully develop the Huarui 2, Hua Rui 2 is in the realization of the basic functions of Hua Rui 1 under the premise of further improved the special instructions and vector operations Unit, while adding a reconfigurable computing core, more efficient for the field of specific computing, on the basis of a more general emphasis on the combination of special.


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