Thinking Under the Background of Challenges to China's IC Industry Development  

Board Chairman of NFME    Shi Mingda

Good morning, distinguished Chairman Yu Zhongyu, and all experts and friends of the industry present here. I speak on behalf of companies to talk about the opportunities and reflections about the current financial crisis. I mainly talk about the challenges that China's IC industry is facing currently, as well as my views on the industry development, the favorable opportunity of the domestic IC industry, and ways to overcome challenges and share opportunities for IC companies. Financial tsunami caused huge impact on the global semiconductor market, and a lot of semiconductor companies suffered output reductions, losses and layoffs. Industry situation can be summed up as: rapid decline, beyond expectation, underemployment, widespread losses, massive layoffs, increased integration and the situation remaining unclear. The impact of financial tsunami on the global semiconductor industry is so crucial that it has never been experienced by businessmen of my generation.

Chinese IC industry development has been challenged by a certain impact and slowed down. Especially last year, we experienced a negative growth in the fourth quarter and suffered a loss.  Financial crisis has not bottomed out. The semiconductor industry is likely to be continuous weak in the first half year. At present, the world's semiconductor production capacity margins are not very high, so it will be very difficult for Chinese IC industry to continuously maintain growth.

To China's IC industry, opportunity is also embraced in danger. Danger could be transformed into opportunities under certain conditions. As China's IC industry encountering severe challenges, it is also ushered to many development opportunities, including those brought about by national policies, by new technologies and products, by the adjustment of world economy pattern, and by the law of survival of the fittest.

Development opportunities that involve in National policy include: home appliances to the countryside, 3G licensing, implementation of major projects and so on, as well as the promulgation of planning to revitalize electronic & information industry, especially the Three Key Tasks, Five Policy Measures and Six Key Projects in the planning are related to the promotion of the IC industry development.

Also, the restructure of the world economic pattern brings opportunities and benefits to the development of IC industry. The intensifying market competition and changing market environment in developed countries make oversea semiconductor companies determine to reinforce their business in China and enhanced their product outsourcing. This is what we can feel as contacting with our customers. On the other hand, based on the few years’ development, we have been equipped with the capacity of accepting outsourcing and transferring.

Besides, the law that survival of the fittest provides a way out. Global economic downturn results in elimination of some disadvantaged enterprises in the competition. The further adjustment of the talent and capital markets will strengthen the advantaged enterprises. The domestic IC companies that are superior in customer resources, technologies and equipments, can enhance their competitiveness and achieve development by leaps and bounds through mergers, acquisitions and integrations of excellent assets. We believe that the winner-take-all.

How to overcome the challenges and share the opportunity? First, we must have firm confidence; second, have an accurate way of thinking; and third, have steady measures. Achieve development through management and innovation. Develop through management means as facing tough environment, we must self-cultivate, and establish an efficient management style that fits the company’s characteristics well, so as to enhance our core competitiveness. The measures include reducing expenditure, cutting costs and enhancing the level of cost management, and also include paying close attention to the financial state, throwing investment prudently, arousing awareness of risk management and retaining the talent and hope. About reducing costs and cutting expenditure, we should increase efficiency, cutting cost and obtain new competitive edge through institutional innovation, technological progress, structure optimization and management strengthening. As for prudent investment, we should strengthen risk management. Any time it is necessary to consider stepping up development, but also pay attention to prevent risks. Some enterprises might normally do a better job of risk prevention, so in the face of economic crisis, the difficulties encountered will be smaller. About the impact of financial crisis, a longer estimation is necessary so that we can make more adequate ideological preparation.

One more point is, as long as there is an ability, the company should try to avoid layoffs, as to retain the talent is to retain the hope of enterprises. Although meeting some difficulties, the company should adhere to non-layoffs. Development through innovation mainly means the scientific and technological innovation. Science and technology are primary productive forces. The development of China's IC industry must rely on technological innovation to expand its technological advantage, promote industrial upgrading and market development with technology improvement. Technological innovation must adhere to market orientation. China has the strategic planning, and we have to take the direction of innovation combined with the country strategic planning. Only in this way that the innovation fruit can be given full play.

The innovation in our company has two directions. One is focusing on strategic planning, and developing advanced packaging technology, the other is low-cost technology solutions, such as localization of material purchase. To manufacturing business, in a sense, not low-cost technology is not high technology. Another way to promote development is cooperation. In cold winter of economy, we’d better stand together and get warm from each other, conduct strong-strong cooperation, and view the past to find the road to the future. To improve horizontal cooperation, our company NFME established an R&D institution specializing in developing new techniques in Tokyo, Japan. At the same time, we consolidate the vertical cooperation. How can NFME provide a full range of services to China’s IC enterprises? We mainly specialize in IC assembly and test.

At present, because of the introduction of national policies, as well as the development of emerging markets, such as 3G mobile phone, mobile communications and high-tech electronics, standard products develop rapidly in China. And as a result, advanced IC products need developing. These new integrated circuit products require advanced test technology for their services. The advanced assembly and test technology includes SIP series package, BGA, CSP, WLP, FC and so on. The new test technology includes SOP series testing, etc. Last year our company developed some new products, and up to now, new generation of WLP products have been under development. We are more competitive in cost. We also develop SIP series packages according to market demand. So far, BGA and CSBGA have been put into mass production, and newWLP products are under development. Our company provides services for CMMB mobile TV products by integrating 3D Packaging technology, SMT technology and BGA technology. Products are mainly in BGA package outline. We assemble chips of various different functions and a number of capacitors and resistors, and use 70-micron wafer back grinding technology to implement multi-layer stack.

 　  We keep the belief that a product of over-high cost is never a high-tech product. As a company engaged in assembly and test intends to enter advanced assembly industry, we should continuously work over the low-cost solutions to meet customers’ satisfaction and to support corn competitiveness. We, Nantong Fujitsu, are willing to provide a full range of service for the development of Chinese IC industry; we are willing to be engaged in extensive cooperation with friends of the business, to meet the challenges and share the opportunities together. Let’s hand in hand, and move forward to welcome the warm spring of Chinese IC industry.