20/05/2020
- US chip giant GlobalFoundries confirms it has ceased operations at its only Chinese facility, with industry experts saying the poorly-planned project was doomed to fail
- Closure deals blow to China’s plans to move up semiconductor value chain, amid increasingly hostile tech rivalry with the United States
Beijing boasted that the final total investment in the GlobalFoundries plant could be US$10 billion. The plant was intended to produce 300mm wafers, a key material in making chips, but production never started at the 65,000 square metre facility, which was completed mid-2018. Photo: Weibo
US chip giant GlobalFoundries has halted operations at a joint venture factory in China, the company has confirmed, dealing a potential blow to China’s bid to own a bigger slice of the global semiconductor market.
The closure of the firm’s only China facility comes just three years after it announced plans to make chips in the mainland, and comes amid an escalating tech war with the United States.
The winding down, however, has little to do with the fierce superpower rivalry. It comes after two years of speculation as to what was actually happening at the US$100 million facility, which was hailed as “a miracle” by local media when announced to fanfare in 2017, but which never got off the ground.
Nonetheless, the symbolism is rich.
China is struggling in its efforts to boost its domestic chip research and production in a bid to counter US efforts to block it from American technology.
Last week, the US Department of Commerce upped the ante by
banning the sale
of Huawei-designed chips produced outside America if they are made using the US software and technology, adding further pressure to the Chinese telecom giant’s global supply chain.
The GlobalFoundries factory, in a hi-tech park in the southwestern city of Chengdu, was one of China’s major foreign-invested semiconductor projects, for which the local government rolled out the red carpet three years ago.
At the time, Chengdu boasted that the final total investment in the plant could be US$10 billion. The plant was intended to produce 300mm wafers, a key material in making chips, but production never started at the 65,000 square metre facility, which was completed mid-2018.
A spokesperson for California-based GlobalFoundries confirmed that the Chengdu plant had stopped operations and that it had offered staff an “employee optimisation plan”, a commonly-used euphemism for lay-offs.
“The plan is being carried out on the basis of open and transparent communications with the employees and they have been offered various options to choose from based on their personal situations,” a company statement read.
A 2018 annual report from the joint venture, in which GlobalFoundries had a stake of 51 per cent with the rest controlled by an investment vehicle of the Chengdu government, showed that the plant had 320 employees.
A company notice sent to employees dated May 14 and seen by the Post said that after mid-June, the company would only pay 70 per cent of Chengdu’s minimum monthly wage, about 1,246 yuan (US$175.38), while negotiating severance packages with staff.
For some industry analysts who have followed the Chengdu project from its inception, its demise has less to do with the trade war, more to do with poor planning.
There was little detailed research and planning before the project was launched. As far as the Chengdu government is concerned, it lacks a sufficient understanding of GlobalFoundriesGu Wenjun, analyst
“There was little detailed research and planning before the project was launched. As far as the Chengdu government is concerned, it lacks a sufficient understanding of GlobalFoundries, its decision-making mechanism and economic strengths, and it did not get strong support from the central government,” said Gu Wenjun, chief analyst at Shanghai-based semiconductor research firm ICwise.
The idea of establishing a joint venture was first pitched to
Chongqing municipality, a neighbouring city of Chengdu, in 2016. Chongqing signed a memorandum of understanding with GlobalFoundries to set up a plant to manufacture 300mm silicon wafers – components for making integrated circuits – using technology from GlobalFoundries’ Singapore factory.
After the deal to open a Chongqing plant fell through for unclear reasons, Chengdu moved in to cut a deal with GlobalFoundries in late-2016. A 2017 blueprint stated that 3,500 employees could be working at the site, according to Wallace Pai, then GlobalFoundries’ general manager for China.
But production never started. Initially the project was supposed to have two phases: using mainstream technologies to manufacture 300mm wafers from 2018, then transferring to more advanced technologies in late-2019.
However, in October 2018, the two partners decided to “bypass” the phase one manufacturing stage, partly because of China’s increasing demand for more advanced products and GlobalFoundries’ own financial stress. The project has since stalled.
Comparing official announcements from the Chengdu government and GlobalFroundries back in 2017, Gu from ICwise said the two had different focuses, which might explain the plant’s derailment. The government clearly wanted to bring in mainstream, lower-risk technologies to boost the city’s brand, while the company aimed for Chinese capital and government support to invest in more advanced technology, Gu said.
The joint venture will continue after the factory’s demise, with GlobalFoundries still expecting to expand sales in the Chinese market, the company said in its statement. It now has five factories, three in the US and one each in Singapore and Germany.
When The Post contacted the office of the joint venture partner within the Chengdu government, the person answering the phone said they did not know anything about the closure nor future plans, before hanging up without giving their name.
“Our focus in China is on developing and growing our partner ecosystem including creating local technology infrastructure and bringing more intellectual property vendors and electronic design automation partners to better serve the local market,” the company said.
According to the China Semiconductor Industry Association, China’s integrated circuits sales rose 15.8 per cent in 2019 from a year earlier to 756.2 billion yuan (US$106.44 billion), while sales in the global semiconductor market dropped by 12 per cent to US$412 billion.
Last week, Dutch company ASML Holding, a key supplier of chip-making equipment, set up a plant in Wuxi, in Jiangsu province, in a boost to China’s efforts to attract foreign semiconductor investment.
Source: SCMP
Posted in advanced technologies, American, ASML Holding, ‘a miracle’, Beijing’s, blow, Chengdu, China, China Semiconductor Industry Association, chip, Chongqing Municipality, Dutch, euphemism, Factory, foreign, Germany, global, GlobalFoundries, hailed, hostile, Huawei-designed chips, Investment, jiangsu province, lay-offs, mainstream, manufacture, plans, production, semiconductor, semiconductor giant, semiconductor market, shuts, Singapore, symbolism, tech rivalry, technologies, Technology, transferring, Uncategorized, United States, US chip giant, US Department of Commerce, value chain,, Wuxi |
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29/04/2020
BEIJING (Reuters) – China announced on Wednesday that its parliament will open a key annual session on May 22, signalling that Beijing sees the country returning to normal after being reduced to a near-standstill for months by the COVID-19 epidemic.
During the gathering of the National People’s Congress in the capital, delegates will ratify major legislation, and the government will unveil economic targets, set defence spending projections and make personnel changes. The ruling Communist Party also typically announces signature policy initiatives.
The session was initially scheduled to start on March 5 but was postponed due to COVID-19, which has infected nearly 83,000 people and killed more than 4,600 on the mainland after emerging late last year in the central city of Wuhan.
As the epidemic has subsided, economic and social life gradually returned to normal, making it possible for the congress to convene, the official Xinhua news agency quoted the standing committee of the NPC, the legislature’s top decision-making body, as saying.
The committee also appointed Huang Runqiu as the new minister for ecology and environment, a post vacated when predecessor Li Ganjie became deputy Communist Party chief for Shandong province earlier this month, Xinhua reported.
Tang Yijun was also named as the new justice minister to replace Fu Zhenghua, who has reached the retirement age of 65 for ministers.
The Chinese People’s Political Consultative Conference (CPPCC), an advisory body to parliament, has proposed starting its annual session a day before the parliamentary session opens.
Analysts expect China to roll out additional fiscal stimulus in order to cushion the blow from COVID-19, which has developed in to a worldwide pandemic that some fear will trigger a severe global recession.
China’s economy contracted for the first time on record during the January-March period, when the government imposed severe travel and transport restriction to curb the spread of the epidemic.
Parliament is also expected to discuss the anti-government protests in Hong Kong, amid growing speculation that Beijing take steps to strengthen its grip on the city.
It is unclear how long parliament and its advisory body will meet for this time, and people familiar with the matter have told Reuters that this year’s annual sessions could be the shortest in decades due to COVID-19 concerns. Usually more than 5,000 delegates descend on Beijing from all over China for at least 10 days.
Beijing city plans to ease quarantine rules as early as Thursday, two sources familiar with the situation told Reuters, ahead of the key political meetings.
People arriving in the capital from other parts of China will no long have to be quarantined for two weeks unless they come from high-risk areas such as Heilongjiang in the north and some parts of Guangdong in the southeast, the sources said.
Source: Reuters
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28/04/2020
SHANGHAI (Reuters) – Apple Inc’s (AAPL.O) discounts on the iPhone 11 in China and the release of a new low-price SE model have put the company in a better position than rivals to weather a coronavirus-related plunge in global smartphone demand.
While China, which accounts for roughly 15% of Apple’s revenue, appears to be a rare bright spot, investors will be keen to get a picture of global demand when the Cupertino, California-headquartered company reports second-quarter results on Thursday.
The iPhone maker has shut retail stores in the United States and Europe following the COVID-19 outbreak, and China is the only major market where it has been able to reopen all shops.
Consumer spending is expected to be muted as the pandemic has crippled economies and Apple, the world’s second-most valuable tech company, is better armed with the launch of its new price-conscious iPhone model, analysts said.
“Apple is better positioned than most to experience a rapid recovery in a post COVID world,” Evercore analyst Amit Daryanani said in a research note. “We see demand as pushed out, not canceled.”
He added that the launch of the $399 iPhone SE suggested that Apple’s supply chain was getting back on its feet after weeks of shutdown earlier this year.
Analysts expect Apple to report a 6% drop in revenue and an 11% fall in net income in its fiscal second quarter, according to Refinitiv data.
On the other hand, Chinese brands such as Oppo and Vivo who have steadily moved to offer high-end models to challenge iPhones, stand to lose marketshare as bargain hunters choose Apple.
Earlier this month, several online retailers in China slashed prices of the iPhone 11 by as much as 18% – a tactic Apple has used in the past to boost demand. And while initial social media reaction to the new iPhone SE was muted, analysts said they were seeing a pick up in demand.
The cheaper iPhone SE could tempt iPhone owners to opt for a newer device, something they might have otherwise delayed in a weak economy, said Nicole Peng, who tracks the smartphone sector at research firm Canalys.
“People want to avoid uncertainty in a downturn,” she said. “Having a brand like Apple that can showcase quality and make people less worried about breakdowns or after-sales service can bring in buyers.”
CHEAP IS GOOD
Early data suggests that the Chinese smartphone market is recovering rapidly in the aftermath of the virus, and Apple has emerged relatively unscathed.
Sales of iPhones in China jumped 21% last month from a year earlier and more than three fold from February, government data showed, meaning March-quarter sales in the country were likely to have slipped just 1%.
To be sure, a recovery in Chinese demand won’t offset sales lost in the United States and Europe. And the company is yet to launch a smartphone enabled with 5G wireless technology like those offered by Asian rivals, a disadvantage for Apple so far.
But those same expensive 5G models may not sell well in the current climate of frugality, analysts said.
“If there are no massive subsidies (in China), I doubt there will be many smartphone users who will be eager to upgrade to 5G,” said Linda Sui, who tracks the smartphone sector at research firm Strategy Analytics.
Sui expects iPhone shipments in 2020 to be down 2 percentage points at the most, versus double digit declines at Chinese firms.
Apple also has revenue from its services business to fall back on. It has leveraged its large iPhone customer base to boost services revenue from music, apps, gaming and video.
“Apple’s Services segment should remain resilient in today’s work-from-home environment, thereby demonstrating the durability of Apple’s model,” Cowen analyst Krish Sankar said.
Source: Reuters
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