Thirty Years of Core Fire: The Root and Bud Era (2000 - 2010)

Editor's Note: Today, everyone understands the significance of chips for a country's development. However, few may be aware of the twists and turns in the development of a tiny chip and the numerous stories it holds. After 2000, China's semiconductor industry embarked on a new path of marketization, internationalization, and systematic development. A modern semiconductor era in tune with the pulse of the times quietly began.

Through the new series "Thirty Years of the Chip Blaze," we hope to jointly review the development of China's semiconductor industry from the turn of the millennium to the present. We aim to summarize experiences, understand the causes and effects, and reach a consensus on the future development of the semiconductor industry. Meanwhile, this story also provides strong references for China's science and technology to achieve self - reliance and strength.

This series is divided into three parts based on a relatively broad timeline. The first stage, from around 2000 to 2010, was the initial stage of China's semiconductor industry. Key enterprises were established, and the industrial chain began to take shape. The second stage, from around 2010 to 2020, saw China's semiconductor industry initiate large - scale global mergers and acquisitions. The global chip landscape welcomed the Chinese force. The third stage, from around 2020 to the present, with the influence of geopolitics, has forced China's semiconductor industry to accelerate its path towards self - reliance and strength.

The three stages are closely linked, jointly demonstrating how China's chip has grown from a patriotic ideal to the foundation and safeguard of Chinese - style modernization.

The chip blaze has spread over thirty years, lighting up a unique space for China's science and technology.

Since the 1980s, China has launched several semiconductor initiatives. For example, the "531 Strategy" in 1986, the "908 Project" in 1990, and the "909 Project" in 1995. However, like many high - tech industries, the drawbacks of the national - led system soon became apparent.

The relatively closed industrial system and the industrial development away from the market and international mainstream technologies trapped most related products in the vicious cycle of "unsellable" and "unusable." With the large - scale import of high - quality overseas semiconductor products, there emerged a new consensus within the industry that China's semiconductor industry must move towards marketization.

After the millennium, with the deepening of the market - oriented economic wave, the semiconductor industry began to shift from being plan - dominated to market - dominated. The domestic semiconductor industry started to take root, and enterprises that would later become the cornerstones of the industry began to sprout. Industry leaders stepped onto the stage, and the era of the budding of China's semiconductor industry officially arrived.

The story began with a large number of patriotic entrepreneurs returning from the United States, Japan, and other places, initiating the thirty - year wave of the chip blaze.

The Wave of Return

The industry generally believes that Dr. Deng Zhonghan's return to China in 1999 kicked off the new wave of semiconductor entrepreneurship in China. In that year, Deng Zhonghan founded Vimicro and later proposed the concept of "China Chip." The idea that China should have its own private semiconductor companies and a market - oriented semiconductor industrial chain sparked a huge response in China's dynamic and confident economy.

Before and after this, a large number of semiconductor talents who had studied in developed countries began to return to China to start businesses. At that time, the United States and Japan were in a "two - power rivalry" in the semiconductor field. Therefore, most of the returning semiconductor entrepreneurs came from the United States and Japan.

For example, Uni - Chip Semiconductor, founded by Chen Jie and others, is a representative of those who returned from Japan. At that time, the IDM full - industrial - chain model was prevalent in Japanese semiconductor enterprises, with advanced technology and a solid work style. Chen Jie and others brought back the advanced technology and practical work style of the Japanese semiconductor industry, helping China's semiconductor industry catch up with international mainstream technology levels in fields such as communication chips. Later, Chen Jie founded Superpix, opening up new development space for domestic chips in the image sensor field.

Another group of returning forces was represented by a large number of semiconductor talents who returned from the United States around 2001. The most representative of them was Spreadtrum, jointly founded by Wu Ping and Chen Datong. At that time, the United States was in a period of rapid development and transformation in the semiconductor industry, with an open - minded business logic and an aggressive development plan. These semiconductor elites who returned from the United States brought not only advanced Silicon Valley technology but also its business logic and marketing strategies, bringing a cutting - edge way of thinking and innovative spirit to China's chips.

Meanwhile, returning talents in different fields invested in semiconductor entrepreneurship, laying the foundation for China's semiconductor industrial chain. For example, Zhu Yiming, the founder of GigaDevice, in the semiconductor design field; Wang Shumin, the founder of Anji Technology, in the semiconductor material field; and Yin Zhiyao, the founder of AMEC, in the semiconductor equipment field.

Thanks to the efforts of these returning entrepreneurs, China's semiconductor industry began to catch up with the global wave and had the foundation to integrate global advantages and explore its own industrial model.

Whether returning from the United States, Japan, or Europe, the semiconductor talents at that time generally shared a similar spiritual core: they were convinced that after Deng Xiaoping's Southern Tour Speeches, China had a highly certain development prospect. Under the economic background, China's semiconductor industry and the entire science and technology industry were bound to have great development potential. The spirit of these overseas students pursuing their ideals and serving the country through science and technology jointly constituted the beginning of China's semiconductor industry's globalization: a wave of return.

At that time, China's semiconductor industry was only in its infancy, lacking almost everything. However, the industry was full of confidence in the future.

Spreadtrum Paves the Way

From 2000 to 2012, China's semiconductor industry was in the initial stage of marketization, facing many problems such as insufficient venture capital, weak commercialization ability, and poor management. However, one company's exploration during this period helped the entire industry see how to overcome these difficulties and objectively promoted the maturity of the semiconductor industry - that is Spreadtrum, mentioned earlier.

In April 2001, Spreadtrum Communications Inc. was established in the Cayman Islands, and its wholly - owned subsidiary was simultaneously established in California, the United States. In July of the same year, Spreadtrum Communications (Shanghai) Co., Ltd. was founded, and Spreadtrum officially began its business exploration in China. Different from the common model of Chinese semiconductor enterprises at that time, which had no idea where to get funds and could only rely on self - financing for R & D, Spreadtrum was the first to introduce the venture capital mechanism in the semiconductor industry, bringing about a significant change. At the same time, Spreadtrum gathered a large number of talents who returned from Silicon Valley and brought back the management mechanism and business philosophy of Silicon Valley, improving the generally poor management situation in the semiconductor industry.

On the other hand, semiconductor entrepreneurs who returned at that time often faced a difficult problem: they brought back technology from abroad, but there was no corresponding market in China. As a result, many semiconductor technologies became "useless skills" with no practical application. However, Spreadtrum keenly found the key market opportunity of the 2G mobile phone boom and changed the company's business situation through commercialization.

In April 2003, Spreadtrum launched the world's first integrated single - chip SC6600B for GSM/GPRS (2.5G) multimedia baseband, winning industry recognition. Later, with the continuous boom of dual - mode baseband chips in the market, Spreadtrum established its pioneer position in the mobile communication field.

In October 2006, Spreadtrum witnessed the production of its 10 millionth chip, marking that it had firmly grasped the opportunity of the 2G mobile phone boom. Especially with the large - scale explosive growth of mid - and low - end mobile phones and even shanzhai phones, relying on the business strategy of "low price and acceptable quality," Spreadtrum became one of the most profitable semiconductor enterprises in the early stage of the global mobile communication boom and was once on par with companies like Qualcomm and MTK. Spreadtrum's great technological success in fields such as "dual - SIM dual - standby" even influenced our perception of mobile phones.

Actively pursuing policies and responding to national calls while seizing market opportunities and occupying industrial niches, this "two - pronged approach" model made Spreadtrum a representative company in this stage and objectively became a model for the subsequent continuous development of China's semiconductor industry.

Conversely, many semiconductor projects emerged during this stage. Most of them relied too much on policy support, deviated from market rules, or strayed from the semiconductor industry's development path after achieving some results, resulting in generally poor outcomes.

Spreadtrum's exploration became the first guiding light for China's semiconductor marketization.

SMIC Lays the Foundation

In the semiconductor industrial chain, wafer manufacturing is the most technically demanding and capital - intensive step. It is also the final connection point for industries such as design, packaging and testing, materials, and equipment. Without manufacturing capabilities, the semiconductor industry loses most of its say and cannot reach true maturity. For the past two decades, SMIC has been the cornerstone of China's semiconductor manufacturing.

In 1997, Texas Instruments announced its withdrawal from the DRAM business. This was also the 20th year of Zhang Rujing's service at Texas Instruments. With the company abandoning its most proficient field, Zhang Rujing reluctantly chose early retirement and returned to Taiwan, China. Unwilling to give up, Zhang Rujing founded Mosel Vitelic in Taiwan and officially entered the chip foundry field. During the battle between TSMC and United Microelectronics, TSMC decided to acquire Mosel Vitelic. Subsequently, Zhang Rujing proposed to develop in the Chinese mainland, where the semiconductor industry was booming and had great potential.

Although this choice was not supported by TSMC and faced many risks under the international situation of the Wassenaar Arrangement, Zhang Rujing resolutely decided to go to the Chinese mainland. In 2000, SMIC was officially established. Its value to China's semiconductor industry can be analyzed from at least three aspects:

First, SMIC filled the gap in China's semiconductor manufacturing field. In 2001, SMIC started trial production. One year later, SMIC began to build a chip foundry in Beijing, and its Shanghai chip foundry entered the mass - production stage. Since then, China's semiconductor industry had a foundation in the manufacturing sector, strengthening the security barrier of the entire industrial chain.

Second, SMIC's rise in the semiconductor manufacturing field promoted the development and improvement of the upstream and downstream industrial chains in the domestic semiconductor field. For example, in 2005, SMIC and Singapore Technologies Engineering jointly established a testing and packaging factory in Chengdu, providing one - stop services for IDM - model companies in the downstream of the chip industrial chain. SMIC's external cooperation, investment, and the market opportunities brought by its industrial supply and demand drove the development of a large number of upstream and downstream enterprises, making China's semiconductor industrial chain more complete.

Third, SMIC integrated the advanced experience Zhang Rujing had accumulated during his long - term work at semiconductor giants. From the very beginning, it was managed as an international company, operating in accordance with international rules and attracting international talents to promote development. This improvement in management ability and strategic vision had a crucial impact on the long - term development of China's semiconductor industry. This can be seen from the fact that many semiconductor leaders later emerged from SMIC.

Driven by a series of favorable factors, SMIC developed rapidly and once came close to TSMC's market share. However, this triggered intense competition between the two companies. The "fuse" hidden within SMIC was ignited.

During the establishment of SMIC, Zhang Rujing brought in a large number of engineers from TSMC and Mosel Vitelic, and the process flow and management model also referred to TSMC's. However, this natural "reference" brought endless troubles later.

In 2003, when SMIC was about to list in Hong Kong, TSMC sued SMIC in California, USA, accusing SMIC employees of stealing TSMC's trade secrets and claiming $1 billion in compensation. After a long - drawn - out lawsuit, TSMC and SMIC reached an out - of - court settlement. According to the agreement, SMIC had to pay TSMC $175 million over six years and disclose a large amount of technical information to TSMC.

In 2006, TSMC accused SMIC again of violating the "Settlement Agreement" and infringing on its technological patents. After a three - year lawsuit, the California court ruled against SMIC in 2009, requiring it to pay TSMC $1 billion in compensation. Facing the high compensation, SMIC finally chose to reach another settlement with TSMC. In addition to paying the settlement amount, it also had to transfer 8% of its equity and 2% of its share options to TSMC. At this point, Zhang Rujing, overwhelmed, chose to resign from SMIC, which he had built from the ground up. SMIC suddenly found itself leaderless, with its R & D rhythm disrupted, blood - making ability declining, and internal factional struggles intensifying.

Although these setbacks brought great challenges to SMIC, it still achieved several key results during this stage. For example, it filled the industrial gap in semiconductor manufacturing, promoted the development of a large number of equipment and material enterprises, and laid the foundation for the subsequent localization of the entire semiconductor industrial chain.

Since its inception, SMIC has attracted much attention. It has also cultivated entrepreneurs' operational capabilities and industrial foresight during various storms. The semiconductor leaders who emerged from SMIC will bring significant changes to the future of China's chips.

The Convergence of Forces

During SMIC's development process, Zhang Rujing chose to cooperate with Datang Telecom, hoping to increase SMIC's penetration in the key mobile communication market by attracting Datang Telecom's investment. However, this capital introduction objectively led to the division of the company into two factions. One was the "Taiwan faction" management with backgrounds in TSMC and Mosel Vitelic; the other was the "Datang faction" management from the investor.

When Zhang Rujing was in office