“The reason SMIC is still lagging in its chip-making technology is not just a lack of human talent…If it continues with its current institutional operational method, it will be tough to narrow the competitive gap. If it wants to fix it once and for all, it must use a broadsword to slice clean its shareholding structure – that is the only way it will improve its corporate governance.”
Should the chips fall where they may?
The difficulties facing China’s No 1 chipmaker Semiconductor Manufacturing International Corp (SMIC) in developing cutting-edge technological prowess corresponds to China’s dilemma as a country in trying to meet its “Made in China 2025” target in the chip industry, says Jun-deh Wu (吳俊德), assistant research fellow of the Division of Cyber Warfare and Information Security (網路作戰與資訊安全研究所) in the 31 August 2018 edition of the Defense Security Weekly (國防安全周報), our Chinese-language publication providing longer-form analysis by INDSR experts about news, security issues and trends that develop week to week.
By 2020, Chinese government figures estimate the demand for human talent in its IC industry will reach 720,000 people, but the supply shortfall will be nearly half the total. “In order to be self-sufficient in chips and meet its goals, China must step up its efforts to throw money around and snatch talent from major manufacturers. It is after high-end technical talent. This is something Taiwan must prevent,” Wu says. But the issue for China is bigger than that, he notes.
China has no effective clustering of its chip industry, with domestic rivals competing from Shanghai to Beijing to Shenzhen to Tianjin – unlike Silicon Valley in the US or Hsinchu Science Park in Taiwan. Against this backdrop, SMIC is heavily dependent on foreign expertise due to talent shortage at home, resulting in staff from all geographies thrown together in technical departments and regular disagreements among them. And as a symptom of SMIC’s complicated government-backed shareholding, factional politics is rife at the management level.
“Whether major reform can be carried out is doubtful, which means SMIC is not likely to gain an upper hand in technology anytime soon,” Wu says.