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The impact of the establishment of electronic components and IC trading centers in Shenzhen on the semiconductor industry

Time:2023-02-04 Views:1351
Source: Myna Core Author: Don
    On January 26, the National Development and Reform Commission and the Ministry of Commerce officially issued the Opinions on Several Special Measures to Relax Market Access in Shenzhen‘s Construction of the Pilot Demonstration Zone of Socialism with Chinese Characteristics (hereinafter referred to as the Opinions), in which the first article pointed out that it would support Shenzhen to establish an international trading center for electronic components and integrated circuits with market-oriented operation. The full text includes 24 special measures in six major areas to support Shenzhen‘s bold efforts.
Source: Xinhua News Agency
    Shenzhen, as the leading demonstration area of socialism with Chinese characteristics and the forefront of the reform and experiment in the future Guangdong-Hong Kong-Macao Greater Bay Area, is one of the largest integrated circuit application and circulation markets in China. Compared with the previous focus on supporting semiconductor design and manufacturing, the Opinions has increased support for distribution channels and supply chains, and formed a favorable situation for the supply chain of components in "deep water".
    |Background analysis of policy introduction
    In general, the trade dispute between China and the United States "exposed" the weak links of the domestic semiconductor industry, and the "lack of core" revealed the asymmetry of information demand in the semiconductor supply chain. The epidemic situation repeatedly tested the stability of the semiconductor supply chain.
    The reasons behind the introduction of the Opinions can be summarized as follows:
    1. The global semiconductor and other component industries are accelerating their transfer to China. Shenzhen, as the center of China‘s component industry, is the general trend to set up a component trading center
    Since the birth of the global component industry, its industrial transfer has shown obvious phased characteristics, successively from the United States to Japan and Europe, and then from the United States and Japan to South Korea and Taiwan, China, China, and then gradually transferred to the Chinese Mainland with the transfer of terminal industries.
    With the transfer of international manufacturing industry to China, the scale of domestic electronic components industry is also growing. By 2021, the market size of electronic components was about 317 billion US dollars, and the average annual growth rate of the market in the past five years was more than 5%. It accounts for about 33% of the global market, ranking first in the world.
Source: sorting out by Myna Core
    According to incomplete data statistics, the scale of Shenzhen‘s information industry will reach 2.8 trillion yuan in 2020, ranking first in large and medium-sized cities in China; 21 enterprises were selected as China‘s top 100 electronic information enterprises in 2020, with the number ranking first in the country; 11 enterprises were selected as the top 100 software companies in China in 2019, ranking second in the country in number; The distributors of electronic components represented by CETCA Hong Kong and Shenzhen Huaqiang ranked among the top three in China.
    In addition, Shenzhen has now formed a distribution center for spontaneous component trading such as Huaqiangbei. This time, it is proposed to set up an international trading center for electronic components and integrated circuits with market-oriented operation, which will help Shenzhen transform electronic component trading to standardization and regularization, improve the upstream and downstream synergy of the industrial chain, and comprehensively improve the supply security of electronic components. Under the new development pattern of "double circulation", Build a support and guarantee system for the development of the national digital economy industry.
    Therefore, the Opinions support the establishment of an international trading center for electronic components and integrated circuits in Shenzhen, which is in line with the actual situation of domestic and Shenzhen component industry development in promoting the convergence and cluster development of upstream and downstream supply chains and industrial chains.
    2. Key areas in trade disputes are controlled by others, and domestic substitution has become a consensus
    Under the influence of trade, the "neck" of China‘s industrial chain is gradually exposed, and the core key technologies in the terminal application field represented by smart phones, computers and automobiles are subject to human control, which to some extent restricts the stable development of the information industry. According to incomplete data statistics, the current domestic component industry has a high degree of external dependence, especially the dependence of high-end core chip products exceeds 70%.
Source: sorting out by Myna Core
    The proposal of the Opinions also hopes to accelerate the healthy development of the domestic electronic components and integrated circuit supply chain, reduce the total cost of the supply chain, optimize the free circulation and overall management of production factors in the industrial chain, and ultimately provide guarantee for the realization of the domestic components industry to become bigger and stronger.
    3. Expose supply chain weaknesses under epidemic situation and "lack of core", and accelerate the transformation of e-commerce model in the distribution industry
    As we all know, electronic components generally need to be transferred from the original factory to authorized distributors and traders, and finally to end customers. The intermediate link involves multiple entities, and the industrial chain is long. Most manufacturers‘ customers (especially small and medium-sized enterprises) need to go through multiple circulation links to obtain electronic components, and the overall circulation efficiency is low. Especially since 2020, affected by many factors such as epidemic and trade, the lack of core has created a global supply chain of components industry.
The supply chain of electronic components is relatively complex
Source: Huaqiang Electronic Network Group
    If SARS happened in 2002, it inadvertently set off a boom in e-commerce; The global component industry supply chain, which has been hit by the epidemic and core shortage since 2020, has bred new space for the vigorous development of industrial e-commerce, and the electronic component distribution industry as a whole has accelerated the transformation to e-commerce mode.
Source: sorting out by Myna Core
    Take the electronic components industry Internet platform represented by the Huaqiang Mall under Shenzhen Huaqiang Electronic Network Group as an example. As the first distributor to realize the exploration of digital transformation mode in China, it is gradually evolving from a single "traditional e-commerce" to an industrial Internet platform with full process, full value chain and full industrial chain.
Strong mall online distribution platform
Source: Huaqiang Mall
    The layout of the trading center proposed in the Opinions reflects the current vigorous development trend of China‘s industrial Internet.
    |Impact on semiconductor supply chain
    As we all know, due to the resonance of multiple factors such as demand, supply, inventory and price, the electronic industry represented by semiconductors presents certain cyclical development characteristics, and its final direct impact is reflected in supply chain problems such as supply and demand imbalance, price fluctuation, and shortage of some core goods, which forms unstable factors for the production and operation activities of electronic industry manufacturers.
    The lack of core in recent years is a concrete manifestation of the cyclical development of the electronic industry. Due to the superposition of multiple factors such as trade zhan and epidemic situation, the current supply chain is basically unsolvable in the short term, which is also the core key point that the Opinions hopes to solve. It hopes to ultimately optimize the overall supply chain of components and parts by "encouraging and guiding global well-known basic electronic components and chip companies and upstream and downstream enterprises (including brands, distributors or manufacturers) to rely on the center to carry out sales, procurement, brand display, software solution research and development, application design, after-sales service, personnel training, etc.". Overall, it will form a significant benefit for the original factory, some distributors and end customers.
    From the perspective of the original factory, due to the long links involved in the semiconductor supply chain, the mismatch between supply and demand of electronic components (that is, the mismatch between supply and demand) often occurs in the mass production stage of enterprises. This mismatch between supply and demand is mainly caused by market demand fluctuations, customer order changes and various emergencies (epidemic, trade friction, war, etc.), which ultimately leads to the failure of the original factory to deliver on time. For example, since 2020, affected by the outbreak of the epidemic, the uncertainty of market changes has increased, further exacerbating the supply and demand mismatch of the original factory in the mass production stage, and affecting the normal production and operation activities of the industrial chain.
    Therefore, the original factory‘s demand for supply chain reform is relatively urgent. The representative of the Xing event is the acceleration of the transformation from a large factory represented by Deyi to direct sales in recent years (for details, please refer to the "Direct Supply and Distribution Strategy of the Global Head Chip Original Factory" of Star Star Core). The establishment of Shenzhen Trade Center is conducive to improving procurement channels, improving procurement efficiency, achieving delivery management, etc., and is good for the long-term development of the original factory.
    From the perspective of distributors, the introduction of the Opinions has changed the "neglect" of the distribution industry in the past and introduced some supporting policies, which will be beneficial to the emerging industrial Internet platform, but will not have a direct impact on the original private component trade.
    At the same time, the Opinions will help Shenzhen Huaqiang North and other places turn non-standard transactions into standard transactions, drive the design, research and development, manufacturing and testing of electronic components to form a complete industrial chain, and promote Shenzhen to build a more complete distribution biological industrial chain around electronic components and integrated circuits.
    In addition, the Opinions are conducive to regulating the development of the entire distribution industry, transforming and optimizing the supply side of the industrial chain through the industrial Internet and big data, and accelerating the transformation and upgrading of the distribution industry. In the short term, some "disorderly speculation" small and medium-sized dealers will accelerate the elimination and further accelerate the merger and integration of the industry. In the long run, it is conducive to the transformation and optimization of the supply side of the industrial chain. Industrial Internet head platforms such as Huaqiang Electronic Network will gradually become the focus of capital attention. The Matthew effect of capital will lead to the rapid development of industrial Internet head enterprises.
    From the perspective of end customers, the traditional industrial structure and production and operation mode of components have been difficult to adapt to the needs of economic development in the new era, and "lack of core" is the specific manifestation. How to ensure a high-quality procurement chain, reduce the uncertainty of the procurement process, and provide efficient and flexible solutions have become its development pain points. The Opinions can provide better solutions for some terminal demand characteristics.
    To sum up, with the development of mobile internet and digitalization, traditional component dealers are facing more and more problems, and the effective integration of online and offline has become a trend. In addition, due to the epidemic and the disorderly speculation of dealers under the "chip shortage", which has seriously affected the healthy development of the market, the reform of the semiconductor supply chain industry is "expected".
    |Write at the end
    Shenzhen, represented by Huaqiangbei, has accumulated many years of experience in electronic components and integrated circuit trading. The establishment of a trading center and a new platform has unique advantages. The issuance of the Opinions will further promote the integration and cluster development of the supply chain of the upstream and downstream industries of Shenzhen components, and give full play to Shenzhen‘s radiation effect on the Gulf Region, China and even the world.
 












   
      
      
   
   


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