An employee showcases a semiconductor integrated circuit at an industry expo on October 31. Photo: VCG

China has become the world's largest semiconductor equipment market thanks to continuous, intensive investment in the sector.



Although the domestic semiconductor equipment market is forecast to maintain rapid growth in the next two or three years, the investment model should become rational, as money needs to be combined more with technology accumulation and talent cultivation, analysts warned.



The global semiconductor industry association SEMI said in a report that South Korea, which topped the ranking for six quarters, yielded to China. Semiconductor equipment shipment in South Korea stood at $3.45 billion in the third quarter, down 31 percent year-on-year, the first drop since the first quarter of 2016, according to the SEMI.



Meanwhile, China became the largest semiconductor equipment buyer with billings of $3.98 billion, up 106 percent.



In the third quarter of 2017, the figure was just $1.93 billion, about 40 percent of the South Korean total.



The SEMI estimates that equipment sales in China will surge 46.6 percent to $17.3 billion in 2019.



"China's first ranking is more related to South Korea's slower pace of increase than the continuous equipment investment in China," Han Xiaomin, general manager of CCID Consulting's integrated circuit business, told the Global Times on Thursday.



Given sluggish demand in overseas markets that has persisted since last year, some international semiconductor giants have been cutting their investment in equipment. They may be seeking changes in their technology direction as well, Han said.



In comparison, the Chinese market has experienced booming development with ramped-up efforts from the government and companies to grow the chip sector.



In 2014, Beijing established the China Integrated Circuit Industry Investment Fund, also known as the "Big Fund," with support from the Ministry of Finance and other entities. The fund's aim is to help build a competitive chip ecosystem for China so that the country can cut its heavy reliance on foreign suppliers.



The first-phase fund completed investment of 138.7 billion yuan ($20.12 billion) in total in May, media reports said.



Meanwhile, more Chinese companies have been showing an interest in the IC sector, especially this year. For example, e-commerce company Alibaba Group Holding unveiled in September an ambitious plan to develop a proprietary artificial intelligence (AI) chipset, and it said it will establish a semiconductor company, named Pingtouge, to meet this goal.



Semiconductor equipment plays a vital role in the manufacturing of ICs, standing at the upstream of the semiconductor industrial chain. "About 70 percent of investment in the industry goes into equipment, which is used to manufacture and test chips," Han said.



Wang Yanhui, head of the Shanghai-based Mobile China Alliance, told the Global Times on Thursday that semiconductor equipment, which requires advanced technology and long-term research and development as well as skilled technicians, is not where China has absolute advantages. Thus most of this equipment is imported, even though in some niche markets, domestically produced equipment can equal or even surpass imported items.



"Traditional powerhouses such as the US, the Netherlands and Japan still dominate the upstream of the semiconductor industrial chain, while China's advantages cluster in chip manufacturing, which is at the downstream of the chain," said Wang.



Analysts said that industry logic dictates a reliance on a connected global market and international division of labor.



"You cannot expect one nation to handle the whole industrial chain," Wang noted.



He added that as China is constantly investing in equipment, it must keep an eye on the connection of that investment with technological improvement and talent training.



"China's IC industry can follow the smartphone development path -



from knock-offs to core technology development and own-brand products," he added.