1、 1 BCG | HOW TRADE RESTRICTIONS WITH CHINA COULD END US LEADERSHIP IN SEMICONDUCTORS ABOUT THIS REPORT To assess how ongoing US-China trade frictions may affect the US semiconductor industry, the Semiconductor Industry Association (SIA) commissioned Boston Consulting Group to conduct an independent

2、study. The work included detailed modeling of the global demand and supply dynamics across end application markets and semiconductor product categories. BCG is wholly responsible for the analysis and conclusions that appear in this report. ABOUT BOSTON CONSULTING GROUP Boston Consulting Group (BCG)

3、is a leading global management consulting firm, with offices in over 50 countries. BCG partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we hel

4、p clients with total transformationinspiring complex change, enabling organizations to grow, building competitive advantage, and driving bottom-line impact. ABOUT THE AUTHORS Antonio VarasAntonio Varas is a managing director and senior partner in the Silicon Valley office of Boston Consulting Group

5、and is a core member of its Technology, Media China could attain leadership in the long term. As experience in communications network equipment and other tech sectors has shown, once the US loses its global leadership position, this dynamic effectively reverses the industrys virtuous innovation cycl

6、e and throws US companies into a downward spiral of rapidly declining competitiveness and shrinking market share and margins. Lower R adaptive processing for multiple antennas and frequencies, for robust battlefield communication and radar systems Directed energy Advanced imagers, optoelectronic tec

7、hnology, signal processing, control systems, and spectrum awareness for laser weapon systems Key US defense modernization prioritiesRequired advancements in semiconductors Source: Department of Defense, Summary of the 2018 National Defense Strategy of the United States of America. 9 BCG | HOW TRADE

8、RESTRICTIONS WITH CHINA COULD END US LEADERSHIP IN SEMICONDUCTORS As digitally connected electronic systems become increasingly crucial for managing advanced weapons systems and critical infrastructure and information, the availability of trusted semiconductor suppliers that can deliver economically

9、 viable, reliable, and secured components will become even more important for national security. To this end, the Defense Advanced Research Projects Agency (DARPA), the R for the equipment used in certain processes; and for fabricating, assembling, and testing chips. No single company or country has

10、 the technical capability to control the entire supply chain. (See Exhibit 5.) 1 According to market data from Gartner. Demand is measured in design terms, not purchase or ship-to terms, to account for the fact that the customerthe original equipment manufacturer (OEM) that designs the end device an

11、d selects the semiconductor suppliersmay differ from the company that actually develops or assembles the device. 12 BCG | HOW TRADE RESTRICTIONS WITH CHINA COULD END US LEADERSHIP IN SEMICONDUCTORS Copyright 2019 by Boston Consulting Group. All rights reserved. Percentage of global totalDemand Perce

12、ntage of global totalDemand Core IP and toolsDesignManufacturingManufacturing inputs EDA Core IPFablessIDM FoundryOSAT Equipment1Materials China Others Europe South Korea Japan United States Total100%100%100%100%100%100%100%100%100%100%100%100%100%100%100%100%100%100% EXHIBIT 5 | The US Leads in Cri

13、tical Layers of the Global Semiconductor Value Chain Source: BCG analysis and estimates based on data from Gartner, Allied Market Research, and Griffin. Note: Supply refers to revenues derived from semiconductor companies, based on country of origin; demandrefers to the total addressable market for

14、design of end devices, based on country of origin of the device company. Green bubbles indicate global market share of more than 15% in the respective layer of the supply chain. EDA = electronic design automation; IDM = integrated device manufacturer; OSAT = outsourced semiconductor assembly and tes

15、t. 1 Includes testing and measurement tools. 2 Mainly Mentor, a US company acquired by Siemens in 2017. 3 Mainly ARM, a European company acquired by Japans Softbank in 2016. 41%27% 30% 25% 78%60% 17% 20%23% 40%29% 15% See Note 2 52%60%52%52%47%34% See Note 3 16% Semiconductor supplySemiconductor sup

16、ply Global share of demand = 15%Global share of supply = 15%Global share 10% Product lines where US suppliers have global share 50%, but there is one or more non-US foreign suppliers with global share 10% Product lines with one or more Chinese suppliers with global share 2.5%1 Product lines where US

17、 suppliers have total aggregated global share 90% Product lines where US suppliers have 50-90% share, and there is no other individual non-US supplier with 10% share Established domestic alternatives to US suppliers Source: BCG analysis based on Gartner market data 1Roughly equivalent to 10% of the

18、size of the China demand, as overall China Design TAM represents 23% of the total global semiconductor revenues in 2018 Established foreign alternatives to US suppliers Currently not established alternatives to US suppliers(require development of alternative architectures) $109B China Design TAM 201

19、8 (23% of global demand) Ease of substitution of US suppliers 73% of China demand in 2018 Specifically, our model includes the following assumptions: Substitution Substitution of of USUS supplierssuppliers will be will be 5 50 0% to % to 100%100% if one or more well-established alternative non-US su

20、ppliers for those semiconductor products exist, with global market share of 10% or more. Substitution Substitution of US suppliers of US suppliers will be 30% to will be 30% to 4 40%0% if no well-established non-US suppliers exist, but if the aggregate share of those rather small alternative supplie

21、rs is 10% or more. No No substitution substitution will occurwill occur if US semiconductor suppliers have more than a 90% share of the global market for a particular product, indicating that clear alternatives are not immediately available. Even under these moderate assumptions, our component-by-co

22、mponent analysis indicates that US companies may lose more than 50% of their current business in China as a result of the combined effect of the export restrictions to companies on the current Entity List and proactive supplier diversification by Chinese customers. Overall, we estimate that continua

23、tion of the current status quo would result in an 8-percentage-point reduction in the US semiconductor industrys global market share. This would amount to a 16% drop in global revenues, equivalent to $36 billion in 2018. (See Exhibit 8.) Since most of the substitution would occur in devices with sho

24、rt product cycles, such as smartphones, PCs, and consumer electronics, most of the impact would probably be felt within two to three years. 20 BCG | HOW TRADE RESTRICTIONS WITH CHINA COULD END US LEADERSHIP IN SEMICONDUCTORS Copyright 2019 by Boston Consulting Group. All rights reserved. $226 billio

25、n $190 billion 48%40% EXHIBIT 8 | The Current Standoff Could Cost the US Industry 8 Percentage Points of Global Share and $36 Billion in Revenue US semiconductor revenue US semiconductor market share 2018Scenario 1: Perpetuation of status quoAfter impact -1 -8 -19 -8 0 -$36 billion (-16%) -8 percent

26、age points Where does US share go? China +4 points South Korea+2 points Japan+1 point Europe emerging markets such as Southeast Asia, Latin America, Eastern Europe, Middle East and Africa generate 33% of their revenues; and the remaining 13% of their revenues comes from high-income regions such as t

27、he US, Western Europe, Japan and South Korea. The s semicemiconductor demand module onductor demand module decomposes the $474 billion of global semiconductor revenues in 2018 across 32 product categories using market data from Gartner. (See Exhibit 14.) Semiconductor revenues by product category ar

28、e then mapped to the 7 types of end devices and 7 demand regions covered in the 1| End devices module. We have built a “data cube” showing what portion of the total global revenues for each of the 32 individual semiconductor product categories comes from which type of end device, and from which regi

29、on. This allows us to calculate the demand for each semiconductor product that comes from Chinese device makers. In our view, this is the most appropriate measure of the size of the Chinese semiconductor market, as it does not include the semiconductors shipped to China for the manufacturing of fore

30、ign devices such as Apples iPhones in Chinese factories. Based on this methodology, we estimate that the total semiconductor demand from Chinese device makers amounted to $109 billion in 2018, representing 23% of global semiconductor revenues. This number is below the approximately $160 billion ofte

31、n seen in reports as the size of Chinas semiconductor market based on underlying WSTS data but this figure includes semiconductors purchased and shipped to China to manufacture devices of non-Chinese brands. 1| 2| 34 BCG | HOW TRADE RESTRICTIONS WITH CHINA COULD END US LEADERSHIP IN SEMICONDUCTORS E

32、XHIBIT 14 | Semiconductor product taxonomy MemoryAnalogDiscreteOptoelectronics DRAM NAND, Flash Emerging Memory Other Memory Voltage Regulator/Ref Data Converter/ Switch/Multiplexer Other Analog Diodes Transistors Other Discretes Image Sensor, CCD Image Sensor, CMOS LED and Other Optoelecronics Gene

33、ral Purpose LogicProcessorsConnectivity / RadioOther FPGA/PLD Display Driver Other Logic MCU 8-bit MCU 16-bit MCU 32-bit Embedded MPU CPU GPU DSP Application Processor Integrated Baseband/ Application Processor Wired Connectivity (all interface functions and controllers) Wireless Connectivity (NFC,

34、WiFi, BT, GPS, Combo.) Discrete Cellular Baseband RF Front-End and Transceivers Power Management Non-Optical Sensors Other Application Specific Note: Based on Gartner Semiconductor market data The semiconductor supply module semiconductor supply module maps the key semiconductor suppliers for each o

35、f the 32 semiconductor product categories considered, and their respective global market shares. We have then estimated the share of Chinas demand calculated in the 2| Semiconductor demand module commanded by semiconductor companies from China, US, Europe, Japan, South Korea and elsewhere in Asia. S

36、ince there is no complete set of public data about sales of individual semiconductor products to Chinese companies, we have applied some assumptions based on our industry knowledge. Essentially, we have assumed that all revenues of Chinese semiconductor companies come only from Chinese customers, an

37、d that Japanese and South Korean suppliers have also a higher share in their respective domestic markets than elsewhere. Aside from these adjustments, suppliers shares in each demand region are expected to be in line with their observed global shares. For example, this module estimates that in aggre

38、gate Chinese semiconductor companies supplied 14% of the demand from Chinese device makers in 2018, while US suppliers accounted for approximately 45% of Chinas demand. For some products such as the integrated baseband/application processor used in smartphones, the share of Chinese suppliers was hig

39、her than the overall 14%. In others such as FPGAs, CPUs or GPUs there were no Chinese suppliers with a share of at least 10% of Chinas demand. The modules 4, 5modules 4, 5 and 6 6 are the “analytical engines” that model the expected changes in the behavior of end users and device makers under the di

40、fferent scenarios considered: 3| 35 BCG | HOW TRADE RESTRICTIONS WITH CHINA COULD END US LEADERSHIP IN SEMICONDUCTORS The e end user purchase behavior nd user purchase behavior changes changes module module evaluates the impact of changes in attitudes of end users, both consumers and businesses, on

41、the market shares of device makers across regions. We have modeled two types of impact, which go in opposite directions and partially offset each other. First, if frictions and trade restrictions between the US and China continue, we expect that US device makers may lose market share in China to dom

42、estic competitors due to a combination of Government substitution policies, trade barriers and shifts in consumer preferences in favor of local brands. And if tensions were to escalate into the technology decoupling scenario, US device makers would be completely shut out of the Chinese market. On th

43、e other hand, we have also modeled that Chinese device makers, for their part, would be also negatively impacted on their sales outside the China domestic market, particularly amongst less price-conscious consumers with more sophisticated technology needs. A global consumer survey run by BCG in June

44、 2019, shortly after the inclusion of Huawei on the US “Entity List”, showed that more than 70% of consumers in developed regions such as the US, Western Europe, Japan or South Korea, or in the “premium” segments of emerging markets such as India and South Africa, had concerns about the performance

45、and quality of Chinese devices if these did not carry US components. Consistent with these observations, market data from IDC shows that Huawei lost 8.5 percentage points of market share in Western Europe in the two quarters of 2019 that followed the enactment of US export restrictions. This represe

46、nted a dramatic reversal of Huaweis strong growth trajectory in this region over the prior two years, during which its share climbed from 8.5% in the first quarter of 2017 to 21% in the first quarter of 2019, right before the announcement of US restrictions. Conversely, Huawei made substantial share

47、 gains in the Chinese local market and other emerging markets, which offset the declines in developed markets and allowed Huawei to keep its overall global market share roughly at the same level it was before the US restrictions were introduced. The s supplier substitutionupplier substitution module

48、module evaluates the changes in market shares of semiconductor companies resulting from the supplier substitution efforts of Chinese device makers. We have modeled three different supplier substitution dynamics that will occur in parallel over the next few years: “Made “Made in China 2025” planin China 2025” plan. This substitution is driven by Chinas industry policy, so it will be taking place in any case, irrespective of US policy measures. Chinas self-sufficiency objectives are considered to be aspirations rather than hard targets that must be met at all costs. So we assume that C