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Power semiconductors bridge the gap between low-voltage control and high-power operation, and between information technology and advanced manufacturing. They are a critical foundation of the national economy and are found everywhere, from every sector of the economy to the defense industry. As countries worldwide face increasingly urgent demands for energy conservation and emissions reduction, power semiconductor devices have expanded beyond the traditional fields of industrial control and 4C (communications, computers, consumer electronics, and automotive) into many industries such as new energy, rail transit, smart grids, and inverter home appliances.
Driven by China's rapid economic growth and the ongoing migration of the international IT manufacturing industry to China, China's domestic electronic information manufacturing sector has developed quickly. This has fueled rapid growth in China's power semiconductor market in recent years, making it the world's largest application market for power semiconductors. In 2010, China's power semiconductor market exceeded RMB 100 billion, reaching RMB 112.75 billion—a substantial 27.13% increase over 2009—with a compound annual growth rate (CAGR) of 10.80% from 2006 to 2010. Looking ahead, China's economy is expected to maintain sustained and relatively rapid growth, and emerging industries such as the Internet of Things, new energy, energy conservation and environmental protection, smart grids, and high-speed rail will see significant development. As the foundation of modern industrial development, power semiconductor devices will find even broader applications across all sectors. China's power semiconductor market will continue to maintain sound growth, and its market size will keep expanding.
I. Semiconductor Industry Market Overview
With the long-term sustained and rapid growth of the domestic macroeconomy, rising demand for consumer electronics, and the continued migration of global electronics manufacturing to China, the domestic semiconductor market has grown rapidly, consistently outpacing the global average. China has now become the world's largest and fastest-growing semiconductor market. Domestic demand for semiconductors has continued to rise, growing from RMB 568.800 billion in 2006 to RMB 1,055.810 billion in 2013. The market demand for domestic integrated circuits and discrete devices is shown in the figure below:
Alongside the continued growth in domestic semiconductor demand, China's semiconductor market sales grew from RMB 56.160 billion in 2002 to RMB 397.310 billion in 2013, a CAGR of 17.82%. According to data from the Semiconductor Industry Association, China's semiconductor industry accounted for 19.56% of the global semiconductor industry in 2012, and the domestic semiconductor industry now occupies an increasingly important position in the global market.
II. Market Size of Power Semiconductor Devices
Against the backdrop of China's rapid economic development and the migration of international IT manufacturing to China, emerging industries such as the Internet of Things, new energy, energy conservation and environmental protection, smart grids, and high-speed rail will see significant development. As the foundation of modern industrial development, power semiconductor devices will find broader applications across all sectors. China's power semiconductor market will continue to maintain sound growth, and its market size will keep expanding.
At present, China's power semiconductor device market is growing rapidly, but total output still falls short of demand—particularly for mid-to-high-end products, which remain heavily reliant on imports. After years of development, domestic manufacturers such as our company have significantly strengthened their competitiveness in certain product areas, including color TV, chassis power supply, and high-power transistors for light sources. We have gradually gained an advantage over foreign competitors and are capturing market share from them. However, in the higher-volume, faster-growing high-end product segments such as high-voltage MOSFETs and IGBTs, a considerable gap with foreign manufacturers remains. Companies from the United States, Europe, and Japan continue to be the primary suppliers in China's power device market, and high-end power devices sold domestically are still dominated by foreign manufacturers. Given the favorable market prospects and the enormous import substitution opportunity, domestic manufacturers must rapidly improve their technical capabilities and upgrade their product portfolios to survive and grow under the current competitive landscape.
III. Key Barriers to Entry in the Power Semiconductor Device Industry
(1) High technical requirements and the need for sustained technology accumulation
The design, packaging, and testing of power semiconductor devices is a technology-intensive industry. Entry requires extensive accumulated manufacturing experience and a high level of technical expertise. The semiconductor industry's rapid technology upgrading cycles also demand that companies maintain continuous innovation capabilities. Technical proficiency and innovation in this industry are primarily reflected in product design, device structure, and production processes, all of which require long-term, large-scale production practice, R&D, and the accumulation of continuous manufacturing experience.
(2) High demand for specialized talent
The power semiconductor device industry is a high-tech sector with stringent requirements for specialized technical talent. Companies source such talent primarily through two channels: internal development and external recruitment. Currently, the supply of professionals with specialized expertise in the industry is relatively limited and insufficient to meet the industry's development needs. New entrants therefore find it even more difficult to attract top-tier professionals, making talent reserves one of the major barriers to entry in this industry.
(3) Stringent customer qualification requirements
Given the nature of this industry, establishing cooperative relationships with downstream customers and receiving orders requires passing stringent customer qualification processes. These include audits of the company's quality system, reviews of internal production management processes, and assessments of whether product reliability meets industry standards, whether the company's financial condition can support on-time delivery requirements, and various aspects such as social responsibility and environmental protection. Customer qualification cycles are long—typically more than six months, and in some industry segments, qualification can take several years. These stringent qualification requirements make it more difficult for new entrants to secure orders and constitute one of the major barriers to market entry.
IV. Competitive Landscape
Globally, a small number of leading international power semiconductor device manufacturers (such as Infineon, Toshiba, Fairchild Semiconductor, and STMicroelectronics) have mastered advanced semiconductor chip manufacturing and packaging/testing technologies. They possess strong R&D capabilities, advanced production equipment, mature production processes, and solid financial resources, giving them significant overall competitive advantages—particularly in terms of operating scale. Among domestic Chinese companies, aside from a few listed companies with relatively large scale, most operate on a comparatively smaller scale.
In terms of technical proficiency, while domestic semiconductor device manufacturers still lag somewhat behind large foreign semiconductor companies overall, they have invested heavily in R&D and advanced equipment in recent years. Their technical capabilities—particularly in packaging and testing—have advanced rapidly, and their products are moving from low-end toward mid-to-high-end. The gap in technical proficiency with leading international companies is gradually narrowing.
