On November 6, the international investment bank Credit Suisse released two reports in Shenzhen, showing that frequent geopolitical issues in recent years, especially the inclusion of many Chinese companies in the list of restricted entities in the United States, has made the process of China’s technology localization even more difficult. urgent.
Technology accounts for 21% of China’s imports, with imports reaching US$449 billion in 2018, a year-on-year increase of 19%. Technology has become the largest component of China’s imports. Among technology imports, semiconductor imports are by far the largest category (about 70%, reaching $311 billion), of which semiconductor memory imports in 2018 amounted to $122 billion (about 27% of total technology imports), Imports of other semiconductor products amounted to $189 billion (about 42% of total technology imports).
Heavy reliance on technology imports has prompted the Chinese government to introduce a number of policy initiatives since 2000, aimed at safeguarding national security, ensuring local supply of technology components, continuing to enhance China’s national strength in high value-added/IP areas, and expanding the pool of professionals , so as to promote the vigorous development of the domestic technology industry.
Wang Xiaoqiong, head of China Science and Technology Research Department at Credit Suisse, said that China has achieved a number of successes in telecom equipment, hardware manufacturing, displays, various key components, and has accumulated some successes in integrated circuit design, mainly in the field of mobile phones and consumer goods experience. While China has invested enormous resources in localizing semiconductor production and design, so far there has been relatively little success other than Huawei. At present, China still has a large gap in semiconductor manufacturing of advanced technology processes (memory and logic), and it may be difficult to get rid of its dependence on imported equipment and certain key materials in the medium term.
In each specific technology field, Credit Suisse said that in the field of semiconductor memory, China still has a long way to go. In the field of semiconductor logic devices, although China has accumulated strong advantages in integrated circuit design, back-end and mature foundry nodes, it is still seriously behind in many areas. In the field of semiconductor equipment and silicon wafers, China is far behind in terms of silicon wafers and equipment, and it is difficult to make a breakthrough in this situation in the short term.
In addition, in the enterprise and server space, Chinese suppliers have strong network strength, and global server expansion may face challenges. In displays, China may dominate thin-film Transistor (TFT) panels and is expected to succeed in organic light-emitting displays (OLEDs), but remains behind in key tools and raw materials; South Korea is likely to exit the TFT space. In the module sector, China can be self-reliant in most areas and is expected to gain more market share in key areas.
For the self-manufacturing of aero-engines, this is one of six major scientific and technological projects that the Chinese government plans to complete by 2030. Ni Jingang, chairman and chief designer of ASRock Aviation Technology, pointed out that the key to the development of China’s aero-engines is to ensure that a proper management framework is established, and the government should commit to devoting sufficient resources to this project in the long term. Even if the management framework is properly established and sufficient government resources are put in place, considering the high barriers to entry in the industry, it may still take ten years for China to independently produce civil aviation engines. In the past few years, traditional state-owned aircraft parts makers have stopped contracting for foreign aircraft manufacturers because of government mandates to focus on major projects. Therefore, many private enterprises have set foot in this field to fill the market gap. Some of these companies have grown rapidly and won international recognition. These companies may become a new force in the development of China’s aero-engines.
With China’s booming economy, China’s air transport demand has grown rapidly over the past two or three decades and has been Boeing and Airbus’ largest customer for a long time. Credit Suisse expects that China will purchase about 900 aircraft and import about 1,800 aircraft engines during the 2019-2021 period, and China’s total commercial fleet will reach 3,639 aircraft during the same period. The Chinese government plans to start localizing aircraft manufacturing, hoping at least in part to meet huge domestic demand.
Credit Suisse said that developing strategic industries will benefit China’s long-term economic development by enhancing the overall scientific and technological knowledge reserve and realizing innovation and optimization in various fields.
However, in modern manufacturing, self-sufficiency may not be practical. Policymakers must ensure that China’s efforts to become technologically independent do not hinder its cooperation with the outside world and its integration into global production chains.
In addition, it is important to establish a mechanism for allocating research funding to help balance the short-term need for research results with the long-term need to provide a foundation for research.
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