The Chip Insider®– Can China build an indigenous Supply Chain?
Author: G. Dan Hutcheson
Summary:
China: can it build an indigenous Supply Chain? There are three major facets to this question answered here:
- Can China build an indigenous Supply Chain?
- Can China build an indigenous Supply Chain that is world-beating?
- Can China afford an indigenous Supply Chain?
It almost seems like yesterday when China’s “Made in China 2025” plan was a novel surprise to the world. But it was not yesterday: Obama was still President of The United States. The surprise was the goal of increasing Chinese-made product content to 70% by 2025, which included making China the world’s leader in semiconductors along with building a vertical supply chain. They had set aside billions to do it.
In 2015 I was in a conference room of a major technology firm in the Netherlands with a magnificently clear day outside the windows. Inside I was encircled by its vice presidents, directors, and analysts, back to the window with no easy escape. They wanted to know one thing: If I believed it was plausible for China to develop its own semiconductor equipment competitors to go after them by 2020 or 2025? ... My answer then was that it was possible, but not in the foreseeable future.
This forecast was based on the fact that, while Taiwan and South Korea have been successful at developing leadership in semiconductor manufacturing, reaching a combined share of production of almost 50% in 2015. But neither had done so with equipment. Taiwan never tried, judging it too difficult. South Korea had tried, had some success with mature technology, but had fallen well short of the leading edge.
Japan had done both in the late-70s with massive public-private cooperation. But the industry’s structure was much different then. By the late 80s the era of entrepreneurial startups had ended and it became a big-company game.
My forecast has proven optimistic. At this writing China … As we drive down the silicon road, my forecast remains: Not in the foreseeable future. I could have confirmation bias, given my optimistic forecast back in 2015. So, let’s look deeper into the reasons behind this forecast…
“Strategy requires a sense of the whole that reveals the significance of respective parts” – John Lewis Gaddis
