From Groundwork to Greatness: The Making of Domestic Semiconductor Capability (Part I)

Friends of the Huaqiang Lecture Hall, it’s a pleasure to reconnect with you. My surname is Song—though some new friends occasionally assume my name is Kinghelm, which is actually the English name of my company. The Huaqiang Lecture Hall has always served as a platform for exchanging ideas, learning, and meaningful dialogue. This is my third time speaking here. During my first session, I shared insights on Kinghelm’s GPS and BeiDou antennas and navigation modules; in the second, I introduced Slkor’s silicon carbide technology.

Often jokingly referred to as a “street economist” in Huaqiangbei, I have also experienced the challenges of entrepreneurship firsthand—even selling personal property at times to continue investing in the integrated circuit industry. Today, I would like to draw from those experiences to share my perspective on “The Road to Domestic Semiconductor Development.”

 

In 2020, as the global pandemic unfolded and strategic competition intensified, integrated circuits moved to the center of global attention. In the digital era, chips are as fundamental as daily necessities, powering everything from communication to industry. Under these circumstances, a critical question emerged: how can we cultivate our own technological foundation and strengthen self-sufficiency in such a vital field?

Mr. Song Shiqiang of Kinghelm during a live broadcast

To illustrate this journey, I began by outlining the global semiconductor landscape. Broadly speaking, the industry can be viewed as three major blocs: the United States; Europe, Japan, South Korea, and Taiwan; and China. This structure shapes today’s international division of labor in integrated circuits and defines both competition and collaboration across the supply chain.

From there, I turned to the current state of domestic development. Across the entire value chain—materials, manufacturing processes, design capabilities, talent cultivation, industrial software tools, and market channels—it is essential to assess both progress and remaining gaps. Each segment highlights meaningful advances while also revealing challenges that must be addressed to strengthen long-term competitiveness.

I also shared a SWOT analysis to present a more comprehensive view of the semiconductor ecosystem. By examining strengths, weaknesses, opportunities, and threats, we gain clearer insight into the realities of the industry and the strategic direction required for sustainable growth.

Finally, I spoke about the future. My perspective is straightforward: progress often emerges through challenge. This is not merely optimism but a pattern seen across history and technological evolution. Entering the integrated circuit field later than some peers and facing external pressures means difficulties are unavoidable. The transition from a traditional agricultural foundation to a modern information-driven economy has been rapid, and the accumulation of scientific research, industrial experience, and talent development continues to evolve. The time spent in a fully mature industrial stage has been relatively short, and the ecosystem is still strengthening.

If oil and steel defined the industrial era, integrated circuit chips now underpin the information age. The gaps to close are substantial, and the road forward requires persistence. Yet resilience and determination remain powerful drivers of progress. The ongoing efforts of engineers, researchers, and entrepreneurs—building capabilities step by step and overcoming obstacles—reflect a shared commitment to advancing the semiconductor industry and shaping a stronger technological future.

The Global Landscape of Semiconductors

When examining the global semiconductor landscape, the United States inevitably comes into focus. As a leading force in the industry, its influence is reflected in three key dimensions.

 

First is leadership in technology and industry standards. In earlier eras, wars were fought over land, resources, and survival. Today, competition has shifted toward markets, talent, and technological influence. By defining advanced standards, holding key patents, and shaping global frameworks, the United States maintains a strong strategic position. The competition surrounding LoRa and 5G standards, including the well-known rivalry between Huawei and Qualcomm, illustrates how standard-setting can influence global industry direction. In this sense, control over technology standards functions like strategic high ground, offering long-term leverage in both innovation and market access.

Second is the United States’ comprehensive strength across foundational research, materials science, manufacturing processes, talent development, innovation ecosystems, and institutional support. More than half of the world’s top universities are located in the U.S., with institutions such as MIT, Stanford, Berkeley, and Harvard leading in research output and talent cultivation. Organizations like Bell Labs played historic roles in advancing materials science and theoretical breakthroughs. Foundational disciplines—mathematics, physics, and chemistry—continue to serve as the “seeds” for technological advancement. In addition, widely adopted platforms such as Android, Windows, and enterprise software systems have shaped global digital infrastructure. Supported by an open innovation environment, companies like Apple, IBM, Microsoft, Tesla, and Amazon emerged, while the synergy between Silicon Valley innovation and capital markets accelerated commercialization. Together, these elements form a robust foundation for sustained technological leadership.

 

Mr. Song of Kinghelm answering audience questions

Third is the completeness of the high-end industrial chain. A truly advanced ecosystem requires both a research-driven innovation chain and a production-driven manufacturing chain. During the pandemic, China demonstrated strong supply chain execution—rapidly scaling mask and ventilator production—yet vaccine development and detection materials revealed gaps in fundamental research compared with leading countries. In high-value products, core elements such as design, technology ownership, branding, and global distribution often remain concentrated in the United States, while other regions focus more on manufacturing and logistics. Beyond industry, technological leadership is further reinforced by financial systems, media influence, and global economic networks, creating a broad and interconnected strategic framework.

Turning to U.S. allies in Europe, Japan, and South Korea, Europe generally maintains a complementary yet competitive relationship. Several European semiconductor companies hold strong positions in specialized segments, including processor architecture, power devices, and automotive electronics. The Netherlands-based lithography leader in EUV technology exemplifies this strength, with demand so high that leading foundries compete intensely for access, and delivery timelines often stretching years.

Japan and South Korea represent another important tier within the global semiconductor landscape. Japan, once dominant in the 1980s, gradually shifted its focus toward high-value upstream materials such as silicon wafers, photoresists, advanced ceramics, and specialty gases, maintaining strong competitiveness in these critical areas. South Korea, driven by large-scale investment, built a powerful memory industry and expanded vertically into broader semiconductor capabilities. Major technology conglomerates have played a significant role in this development, contributing substantially to national economic output and reinforcing their global market influence.

 

The new products of Hall sensors from Slkor

Taiwan’s foundry sector has achieved strong global competitiveness in several areas. With its founder bringing extensive industry experience and international talent, TSMC has grown into a leading provider of neutral wafer manufacturing services, supporting a wide range of global technology companies. UMC also holds a solid position, while the Hsinchu-based ecosystem has fostered a dynamic IC design cluster. Companies specializing in mobile chipsets, display drivers, and networking solutions have built notable strengths in niche markets, reinforcing Taiwan’s role in the semiconductor value chain.

For mainland China, development accelerated following major global industrial and technological shifts. The journey began with basic manufacturing and gradually expanded toward a more complete industrial ecosystem. Starting from labor-intensive production, the focus has steadily moved toward higher-value, technology-driven, and environmentally sustainable industries. As this transformation progresses, lower-end manufacturing has begun relocating to neighboring countries, marking another phase of global industrial redistribution.

At the same time, Chinese manufacturing is transitioning from traditional assembly lines to automation and intelligent production. Many companies are evolving from OEM models to ODM and even brand-driven strategies, integrating R&D, design, marketing, and distribution capabilities. The demographic advantage is also transforming into a talent advantage. With millions of university graduates entering the workforce each year, equipped with structured education and growing practical experience, China continues to build a strong and increasingly skilled talent base to support its long-term industrial development.

Major Events in Recent Years

Let me share some of the major developments in the semiconductor industry over the past two years. The first is the U.S. restrictions involving ZTE and the shutdown of Fujian Jinhua; the second is the ongoing multi-round, full-spectrum strategic competition between China and the United States across technology and industrial domains; and the third is the sustained pressure on Huawei, where the company has demonstrated strong resilience—significantly challenged, yet still standing and continuing to adapt.

 

After President Trump took office, the U.S. government announced in April 2018 a ban on semiconductor sales to ZTE. Following negotiations, ZTE accepted a $1 billion fine, entered compliance supervision, and was required to restructure key management positions to meet regulatory conditions. In October, Fujian Jinhua was placed on the U.S. export control entity list, cutting off access to advanced IC equipment and technologies containing U.S. intellectual property. With billions already invested in facilities and production lines, much of the infrastructure became non-operational. By December, its Taiwanese partner UMC, under external pressure, withdrew its DRAM engineering support, leaving Jinhua without critical technology, equipment, and talent, effectively halting its operations.

The second major development is the ongoing strategic competition between China and the United States. While often described as a “competition,” it has in practice involved repeated rounds of regulatory and technological restrictions targeting key sectors. For example, the 1996 Wassenaar Arrangement, led by the U.S. and Europe, imposed controls on the export of advanced equipment and technologies to China. In the semiconductor field, key processes such as high-temperature annealing and high-voltage ion implantation remain dependent on advanced equipment that is difficult for Chinese firms to access. As a result, some domestic players have had to rely on second-hand equipment, with limited effectiveness in high-end production. In addition, U.S. trade law mechanisms such as Section 301 have been used to investigate and act against perceived unfair trade practices, reinforcing its ability to exert regulatory influence globally through “long-arm jurisdiction.”

SMIC, as one of China’s leading foundries, has also experienced sustained external pressure. Its early development was shaped by key industry figures such as Dr. Zhang Rujing, who later departed amid complex competitive dynamics involving leading global players. As Professor Zhou Zucheng once noted, many pioneers devoted themselves to building China’s semiconductor foundation under challenging conditions. Later leaders such as Jiang Shangzhou, Qiu Ciyun, Liang Mengsong, and Zhao Haijun have played important roles in advancing the industry, and their contributions remain significant in the broader development of the sector. Other companies, including Huajing, Huahong, and Wuhan Xinxin, have also faced similar challenges during their growth paths in this highly competitive global landscape.

Mr. Song of Kinghelm during a live broadcast

The third major development is the mounting pressure on Huawei. In simple terms, Huawei’s founder Ren Zhengfei can be seen as a pragmatic builder of China’s communications industry—developing technology step by step while initially relying on global supply chains for tools, components, and equipment. Over time, Huawei not only advanced domestic capabilities but also became a major global competitor, even outperforming some of its upstream suppliers in certain markets, which drew significant strategic attention.

In December 2018, Canada, acting on U.S. requests, detained Huawei CFO Meng Wanzhou. Although later released on bail, she faced ongoing travel restrictions and potential extradition proceedings, reflecting sustained pressure on the company’s senior leadership. Around the same period, Huawei was effectively excluded from the U.S. smartphone market, while several countries including the UK, India, and Australia imposed restrictions on its 5G solutions, citing security concerns. By May 15, 2019, the U.S. moved toward a broader restriction framework, escalating from partial technology controls to a near-complete supply chain cutoff for Huawei.

Huawei has become a symbolic case in China’s technology development journey and a key representative of its communications and semiconductor ecosystem. The company’s rise as a private enterprise competing at the global technology frontier is highly significant. Its continued resilience has drawn widespread attention. Many observers expect that, supported by a gradually strengthening domestic industrial ecosystem, Huawei will continue to adapt and overcome challenges. The broader aspiration is that more companies will follow similar paths, forming a stronger collective force to advance technological capability and industrial development.

Benchmarking Against Leading Companies

How are Chinese companies performing compared to their global counterparts? To understand this more clearly, we can examine the full semiconductor value chain, including materials, EDA tools, IDM and fabless design, foundry manufacturing, packaging and testing, as well as downstream sales and distribution channels.

 

Starting with materials, silicon wafers are the most critical foundation of integrated circuits, requiring extremely high purity and precision. Leading global players such as Shin-Etsu and Sumco in Japan, GlobalWafers in Taiwan, and LG in South Korea remain well ahead in both technology and large-scale production. In China, companies like Shanghai Xinsheng, Chongqing ChaoSic, Ningxia Yinhe, and Shandong Tianyue are making steady progress, but significant gaps still exist in process maturity, consistency, and mass supply capability.

For supporting materials such as lead frames, sputtering targets, packaging substrates, and polishing compounds, the gap is relatively smaller. However, in key areas like photoresists and silicon carbide (SiC) materials, China still lags behind global leaders. A few years ago, SLKOR (www.slkormicro.com) also explored domestic SiC material substitution, but after multiple experimental attempts, the results did not meet expectations, and the project ultimately returned to using Corning’s epitaxial wafer solutions from the United States.

EDA software is another core pillar of IC design. Earlier today, I discussed this topic with Professor Zhou Zucheng from Tsinghua University, a well-known expert in EDA. Globally, the EDA market is dominated by Synopsys, Cadence, and Siemens EDA (formerly Mentor), which together account for roughly 80% of the market and are deeply integrated into advanced chip design workflows. Siemens EDA was originally American-owned before its acquisition, and its technological foundation remains closely tied to the U.S. ecosystem.

In China, Huada Jiutian currently leads the domestic EDA field, alongside emerging players such as companies with Tsinghua University backgrounds including Boda Micro (later integrated into Garen Electronics), Okas Micro, and Xinhe. Overall, domestic EDA tools still account for only around 5% of the market, but this also indicates significant room for future development and expansion.

SLKOR MOSFETs

Next are IDM and fabless companies. IDM (Integrated Device Manufacturer) refers to vertically integrated firms that manage the entire value chain—from materials and design to fabrication, packaging, and sales. Global leaders include Samsung, Intel, Texas Instruments (TI), Analog Devices (ADI), and NVIDIA (in its integrated platform strategy). In China, Silan Micro is one of the representative IDM-style players.

Fabless companies, on the other hand, focus on chip design while outsourcing wafer fabrication. In China, key players include GigaDevice, UNISOC, HiSilicon, and Will Semiconductor. GigaDevice is well known for its MCU products, though its core IP still relies heavily on ARM architecture. Recently, it has partnered with Nuclei Technology to explore the RISC-V ecosystem, which represents a promising strategic direction.

UNISOC, formed through the consolidation of Spreadtrum and RDA under Zhao Weiguo’s leadership, highlights the role of capital-driven integration in strengthening China’s semiconductor design capabilities. HiSilicon stands among the world’s leading IC design companies, consistently ranking in the global top tier, while still relying on major international EDA tools—demonstrating both its strong engineering capability and the complexity of upstream dependencies. Will Semiconductor has also built a strong position through sustained R&D investment, strategic acquisitions, and ecosystem development, gradually strengthening its footprint in the global semiconductor design landscape.

Mr. Song of Kinghelm during a live broadcast

Foundries are pure wafer manufacturing companies focused on semiconductor fabrication. Globally, leading players include Samsung, TSMC, GlobalFoundries, and UMC, which dominate advanced process nodes and high-volume production capacity. In China, SMIC—supported by both state-backed investment and strong engineering talent—has been steadily advancing and is now capable of mass production at the 14nm node. Recently, Wuhan Xinxin has also achieved notable progress in memory-related technologies, moving closer to international standards in specific segments. Earlier joint-venture platforms such as Huahong Hongli and China Resources Huahong have likewise contributed to the development of China’s IC manufacturing ecosystem. Overall, the foundry sector in China still requires sustained capital investment and long-term technological accumulation to close the gap at advanced nodes.

Packaging and testing is a segment where China is already much closer to global parity, and in some areas even holds a leading position. Major global players include Amkor in the United States, UTAC in Singapore, Nepes in South Korea, and Unisem in Malaysia. In China, JCET stands out as the industry leader, having grown through organic expansion and strategic acquisitions to become one of the largest OSAT providers globally. Tongfu Microelectronics and Huatian Technology also play important roles, contributing strongly to China’s competitive position in global semiconductor packaging and testing.

SLKOR IGBT single device

Sales channels include major distributors, fast-growing e-commerce platforms, and spot trading networks that support a vast number of entrepreneurs in hubs like Beijing’s Zhongguancun and Shenzhen’s Huaqiangbei. Global leaders such as Arrow and Avnet in the United States, and WPG in Taiwan, continue to dominate the traditional distribution landscape. In e-commerce, Digi-Key leads with approximately $3.25 billion in sales, followed by Mouser and Future Electronics, forming a highly efficient global procurement ecosystem.

In China, distributors such as China Electronics Port and Huaqiang Group each report annual revenues exceeding 10 billion RMB, while Taikoyuan continues to grow steadily. Although these players may not control core upstream technologies, their extensive customer networks and market reach give them significant influence in the semiconductor supply chain. Domestic e-commerce platforms such as LCSC, Yunhan, and Liexin—run by industry colleagues—are also developing rapidly and are increasingly comparable to global peers like Digi-Key in terms of service efficiency and digitalization.

Our own products, including Kinghelm GPS/BeiDou antennas (www.kinghelm.net) and SLKOR MOSFETs (www.slkoric.com), have also benefited from these distribution networks. Meanwhile, Huaqiangbei traders not only serve SMEs but also function as decentralized warehousing and logistics hubs, helping maintain the vitality of the broader electronics ecosystem. Personally, I enjoy engaging with these entrepreneurs and sharing IC knowledge and industry stories—it is both practical and rewarding, and never feels repetitive (more to come in the next chapter).