Semiconducting products contain integrated circuits, discrete devices, photoelectric devices, sensors, integrated circuits among which cover artificial circuits and digital circuits that can be further subdivided into micro devices, memorizers and logical circuits. Since integrated circuits occupy over 80% of the market of semiconducting products, which gives them the most representation, it is decent to analyze the semiconducting device market through that of integrated circuits.    

I Industry Analysis
i Semiconducting devices are the foundation of the integrated circuit industry.
1. Semiconducting devices are the technical lead for the semiconducting industry. Semiconducting devices upgrade through the introduction of new semiconducting techniques while the conception of new techniques come from the process of new generations of semiconducting devices. Usually, the R&D of semiconducting devices is 3 to 5 years ahead of the techniques. Therefore, there are great technological barriers in the semiconducting device industry, which gives rise to high market concentration in this industry.  

2. Semiconducting devices are one of the key factors driving the progress of the whole industry. Currently, the development of integrated circuits is still following the Moore’s law. Meanwhile, the structure of integrated circuits is becoming more and more complicated with mounting manufacturing steps. Semiconducting devices with smaller nanometers, higher accuracy and better stability are one of the key factors driving the progress of the whole semiconducting industry. 
3. Semiconducting devices make up the major expenditures of the production lines. Semiconducting devices have attracted the most investments of semiconductor fabrication and packaging enterprises downstream, and covered more than 70% of the chip production lines. At present, the semiconducting device market can be measured by hundreds of billions yuan. In 2016, merchant foundries mainly adopted 14nm, 16nm and FinFET, involving Intel, TSMC and Samsung, and GlobalFoundries. Further, they have been making attempts to reach 10nm or even more advanced 7nm. The demand for more advanced new devices in this industry will go on and on. With the trend toward miniaturization, investments into the production lines are rapidly increasing.        

ii Innovative needs will promote the prosperity of this industry.   
Innovative needs will promote the device market’s growth. The Book-to-Bill Ratio of semiconducting device manufactures is an important prosperity index as it being more than 1.0 means that the industry’s prosperity is growing while when it is less than 1.0, it means the opposite. The semiconducting industry is experiencing a wave of investment boom that since 2016, orders for semiconducting devices have been great as the B/B ratio of semiconducting devices in North America and Japan are more than 1 for the most of the time, and the order amount keeps at the foothills over the years. According to SEMI, driven by the demand of 3D NAND, 10nm Logic and Foundry Segments, the sales of semiconducting devices worldwide in 2016 have reached $41.2 billion, showing a year-on-year growth of 13%. Merchant foundries’ progressing towards leading edge technologies will also promote the procurement demand of relevant devices.    

1. Semiconducting devices focus on wafer fabrication and chip packaging& testing. The process of wafer fabrication is highly complicated, which can be subdivided into 7 independent steps, namely, diffusion, photoetching, etching, Ion implantation, thin film growth, polishing and metallization. Packaging& testing are back-end techniques in the production of integrated circuits, mainly involving slicing, dicing, wafer frame mounting, wire bonding, molding, electroplating, trimming& forming, testing, etc. Packaging& testing techniques are relatively easy with relatively low requirements for production environment and devices, so the demand for semiconducting devices in the part is smaller.  

2. Wafer fabrication plays a main role in the device market. According to SEMI, wafer fabrication devices still undoubtedly dominate the semiconducting device market, resulted from the characteristics of the production chain that wafer fabrication is a key step. In 2016, the sales of wafer fabrication devices reached almost $35.466 billion, occupying 86% shares while in the meantime packaging& testing devices only occupy 6.04% and 4.54% respectively and other devices take up 3.42% shares. 

II Market Analysis
i The market of semiconducting devices is large and concentrated.
1. The market is large. Thanks to the rapid development and large market of the semiconducting industry, the market of semiconducting devices is quite large. According to SEMI, the global sales of semiconducting manufacturing devices in 2015 reached $37.5 billion. However, with the depression of the PC industry and smart phones entering into a stock period, the shipment amount of the semiconducting industry globally decreases and the sales slightly declines.
2. East Asia is the largest regional market. According to SEMI, Taiwan and Korea remain the biggest territories purchasing semiconducting devices in 2016. Taiwan continues to be the biggest market of semiconducting devices for the 5th year in a row. Bucking the trend, Taiwan, Korea and Chinese Mainland greatly expand the market while markets in North America, Europe and other areas shrink.  
3. Photoetching, etching and thin film constitute the core devices. According to Gartner, in 2015, the market values of photoetching machines, etching devices and thin film devices were 8.4 billion, 8 billion and 6.8 billion US dollars respectively, occupying 63.56% shares. Photoetching machines, etching devices and thin film growth devices (CVD/PVD) will remain the dominating devices in the semiconducting industry.    

ii Chinese market grows fast but the degree of self-sufficiency is low.
1. Chinese market grows fast. In 2011, China took up 8% shares in the global market of semiconducting manufacturing devices, and the number kept increasing. In 2016, the number of Chinese Mainland reached 15.66%. Also, the market size of Chinese Mainland in 2015 reached 6.46 billion US dollars.
2. The degree of self-sufficiency is low. Chinese market of semiconducting devices is dominated by foreign enterprises due to, among other factors, engineering level and brand impact and the degree of self-sufficiency is quite low. In the period from 2012 to 2015, the degree kept hovering near 15%. 
3. Wafer fabrication devices in China have great potential. Chinese Mainland holds an opportunity of structural growth. Driven by national industry funds, policy support and the transfer of global industrial chain of semiconducting products into Chinese Mainland, invested production lines of wafers in Chinese Mainland obviously increase in recent years. The accumulative investment excels 80 billion US dollars and the total expected capacity will be at least 800 thousand chips per month.
Generally, 70% of investments in wafer factories go to devices. Accordingly, the investment of 80 billion US dollars to production lines of wafers in 10 years will convert to almost 56 billion US dollars invested into semiconducting devices. Therefore, it is expected that as production lines of wafers in Chinese Mainland go into operation in succession, semiconducting devices will enjoy a nice developmental period with decent growth rate. The market of wafer fabrication devices in China has great potential and the market shares will hopefully increase.   
  
III Competition Pattern
i The global market of semiconducting devices is highly concentrated and dominated by foreign enterprises.
1. The global market of fabrication devices is dominated by foreign enterprises. In 2016, the top 10 enterprises of semiconducting devices in the world were basically from America, Japan and Holland. Moreover, the top 5 big suppliers together occupied 67.45% market shares and the top 10 occupied 78.52% market shares, demonstrating a highly concentrated market.
The competitive advantages of American enterprises focus on plasma etching machines, Ion implanters, thin film deposition devices, photomask fabrication devices, checkout devices, testing devices, surface treatment devices, etc.; The competitive advantages of Japanese enterprises focus on photoetching machines, etching devices, single wafer deposition devices, wafer cleaning devices, gumming machines& developing machines, annealing devices, checkout devices, testing devices, oxidation devices, etc.; The competitive advantages of Dutch enterprises focus on high-end photoetching machines, epitaxial reactors, vertical diffusion furnaces and so on.
Speaking of the three major core devices, the photoetching machine market presents a situation of tripartite confrontation that ASML from Holland, Nikon and Canon from Japan almost monopolize the supply of photoetching machines to all the wafer factories in the world with ASML occupying over 80% shares; as to etching devices and thin film deposition devices, they are controlled by America, Japan and Europe and the major suppliers include Applied Materials from America, Tokyo Electron and Lam Research.

The Global TOP 10 Semiconducting Device Enterprises in 2016

Source: Gartner

ii Homemade devices are developing rapidly but the gap between them and mainstream manufacturers is still apparent. 
According to CEPEA, in 2015, the 35 major manufacturers in the semiconducting device industry in China completed the total amount of sales of 5.2 billion yuan, representing a year-on-year increase of 30.76%. Among them, the top 10 manufacturers together reached 3.7 billion yuan, amounting to the revenue of the 10th manufacturer of semiconducting devices of the world, namely, ASM. Therefore, there is a significant gap between Chinese and foreign manufacturers of semiconducting devices. 
Since the second half of 2016, the global semiconducting industry has welcomed a new wave of prosperity and the sales of the industry have delivered a year-on-year increase of 20%. Coupled with the transfer of the semiconducting industry into China, Chinese Mainland will welcome a great wave of investment and construction of wafer factories. It is expected that there will be 26 newly-built wafer factories from 2017 to 2020, bringing about great demand of semiconducting devices. 
Speaking of semiconducting device manufacturers in Chinese Mainland, aside from the photoetching machines that can only serve to the production of 90nm chips, which is unable to satisfy the demand of newly-built production lines, all of other devices have essentially met the quantity production demand of wafer production lines. Thanks to the geographical advantage, it is quite convenient for domestic manufacturers to cooperate with wafer manufacturers to develop and verify devices. Furthermore, homemade devices enjoy greater competitive advantages in cost performance and after-sales service. Coupled with national policy guide to semiconducting device domesticization, domestic manufacturers of semiconducting devices will hopefully increase the penetration ratio of homemade devices rapidly, as well as welcome a high-speed outbreak period for their own performances with the help of intense construction of wafer production lines in Chinese Mainland.