Wei Shaojun: China’s Chip Design Industry Must Abandon “Path Dependence”

Chip experts recommend that China focus on developing chip design technologies not reliant on advanced fabrication nodes.

On December 11, at the Shanghai Integrated Circuit 2024 Industry Development Forum and the 30th Integrated Circuit Design Industry Exhibition (ICCAD-Expo 2024), Professor Wei Shaojun, Chairman of the IC Design Branch of the China Semiconductor Industry Association, delivered a keynote speech titled “China’s Chip Design Industry Must Strive for Self-Improvement.”

According to Professor Wei, as of now, the number of chip design companies in China has surpassed 3,600, and the industry’s total sales have reached RMB 646.04 billion, an 11.9% increase over 2023. In 2024, the number of enterprises with annual sales exceeding RMB 100 million is expected to reach 731, an increase of 106 compared to 2023. While these achievements are substantial, the Chinese chip design industry still faces unresolved challenges. In response, Professor Wei put forward five major recommendations for further development.

Professor Wei noted that current challenges in China’s chip design sector primarily involve low industry concentration, product positioning at mid- to low-end market segments, rising operational costs, and a growing issue of internal competition (“involution”).

At present, the growth rate of China’s chip design industry is gradually slowing, exerting considerable pressure on the industry’s overall expansion. Statistics show that from 2004 to 2023, China’s chip design industry achieved a compound annual growth rate (CAGR) of 24.8%, significantly outpacing the global semiconductor product market growth.

In 2023, the global semiconductor market contracted by 8.2%, while China’s chip design industry still grew by 8% during the same period. However, in 2024, despite maintaining double-digit growth of 11.9%, the Worldwide Semiconductor Trade Statistics (WSTS) organization forecasts the global semiconductor industry to grow by 19%—the first time in recent years that China’s chip design growth has lagged behind that of the global industry. Meanwhile, the shift toward higher-end product quality in the Chinese chip design industry remains incomplete.

Statistics show that China’s chip design market still centers around communications and consumer electronics, while its share in the computing sector is only around 10%. In contrast, computing chips account for approximately 25% of the global market, illustrating a clear disparity.

Regarding strategies for sustainable development, Professor Wei offered the following five suggestions:

1. Product excellence is the foundation upon which chip design companies stand. Product offerings must pass market tests and fulfill customer needs. Focusing solely on policy-driven market opportunities while neglecting product quality and competitiveness will inevitably lead to failure under intense market pressure. Enhancing product competitiveness is an iterative process requiring persistent effort; it is never a “one-shot deal.”

2. Technology is the bedrock of survival for chip design firms. Companies need to establish their own integrated processes and methodologies suited to their products. Without strong technological prowess, it is nearly impossible to develop leading-edge products. Enterprises should delve deeper into established design technology, broadening and reinforcing their foundations, and creating comprehensive approaches tailored to their needs. They should also strengthen relationships with manufacturing partners. For some leading chip design companies, the connection with foundries now goes beyond mere outsourcing; they have become technological partners, working side by side. In this positive feedback loop, chip design firms drive advancements at foundries, while foundries, in turn, support ongoing product evolution.

3. Innovation is the key to winning in the new era. China’s chip design industry should capitalize on the country’s strength in application innovation. Beyond conventional R&D and technical breakthroughs, application innovation plays a pivotal role in chip design. Many chip design engineers consider application development to be a distant field; however, application innovation has traditionally been a strong suit for China. With a massive market of 1.4 billion consumers, there is huge potential for application innovation, providing a unique advantage to Chinese chip design firms.

4. China should focus on developing chip design technologies, not reliant on advanced fabrication nodes. Two technological paths stand out. First is architectural innovation—this is a golden age for breakthroughs in computing architecture. Second, microsystem integration—three-dimensional (3D) integration technologies emerging from advanced packaging are rapidly gaining traction and moving into the mainstream.

5. For those catching up, path dependence may seem like a shortcut. Yet now is the time for China’s chip design industry to commit to developing its own technology ecosystem. Failure to do so will perpetuate a reactive, step-by-step approach that never truly breaks new ground.