(Yicai Global) Oct. 19 -- Shanghai's Zhangjiang, the area that has China's biggest concentration of around 500 integrated circuit companies, is consolidating its position as "China's Silicon Valley."

More than 60 percent of Shanghai's IC firms are located in Zhangjiang, Pudong district, after more than two decades of industry development initiated by the establishment of big players in the area, Yicai Global learned. Seven of the top 10 global chip designers have set up regional headquarters or research and development centers in Zhangjiang, located between downtown Shanghai and Shanghai Pudong International Airport.

The scale of Shanghai's IC industry reached CNY250 billion (USD34.7 billion) last year, accounting for about 25 percent of the country's total, according to data from the city's economy and informatization commission. The scale of the IC industry in Zhangjiang was CNY170.3 billion.

The eastern city's IC design industry was valued at CNY120 billion in 2021, ranking first in the country, and nearly 70 percent of that was contributed by Zhangjiang. 

One of the biggest destinations for chip companies in Zhangjiang is the Shanghai IC Design Industrial Park, which started construction in 2018. It is currently China's only industrial park focusing on IC design. More than 130 high-quality industrial projects have been introduced, gathering more than 300 design enterprises and 70,000 employees, with businesses covering all categories of IC design.

Cornerstone Players

The establishment of chip foundry Semiconductor Manufacturing International over two decades ago drove the first peak of the local IC industry. The industry giant attracted other players to the area. 

"SMIC started construction in 2000, and I returned to Shanghai right next year to found VeriSilicon," Dai Weimin, chairman of VeriSilicon Holdings which is listed on the Shanghai Stock Exchange's Star Market, said in an exclusive interview with Yicai Global.

Dai's rationale was that the clustering effect in Zhangjiang should attract more investments. "Zhangjiang now has the most complete industrial chain, gathering enterprises from every link of the industrial chain, including manufacturing and design."

Zhu Min, chief executive of MindMotion Microelectronics, confirmed the timeline. The chip investment boom began around the millennium when companies followed SMIC to settle in Zhangjiang, the CEO said.

Zhangjiang was the best location to start a chip design company from 2006 to 2008 as the area gathered talents, making it easier for communications. People did not need to go farther than enter a restaurant near the Zhangjiang metro station to find entrepreneurs, he said. "It helps to create new ideas."

VeriSilicon is inherently a service provider. "Our business requires us to work very closely and communicate frequently with design companies, and Zhangjiang provides us with such conditions," the chief said. Especially in recent years, the effect of industry concentration has been very obvious, Dai added.

Watching the early steps of chip manufacturing behemoths such as SMIC and Huahong Group, Dr. Yin Zhiyao and his team returned to China and founded Advanced Micro-Fabrication Equipment in Zhangjiang. Not long after that, AMEC developed the first domestic high-end etching machine, Cao Liansheng, vice president, told Yicai Global.

Infrastructure Edge

Zhangjiang is the most concentrated area of scientific research institutions and facilities in Shanghai, which is also a key factor for attracting semiconductor enterprises.

"The infrastructure here is complete, with many large scientific instruments," Zhu said. Some equipment costs millions of dollars while companies generally need them only occasionally. Since Zhangjiang has institutions that specialize in providing such services, it makes it convenient for everyone to work here, he added.

MindMotion used to be located in downtown Shanghai but the premises were not ideal because building managers were not familiar with the firm's operational requirements. For example, air conditioning in ordinary office buildings is usually turned off by 8 p.m., while MindMotion's servers need AC around the clock, Zhu said. Moreover, some equipment may be too heavy for normal buildings. In Zhangjiang, none of these are problems as all companies have similar needs, Zhu said.

Among all chip firms listed on Shanghai's Star Market, designed for the funding needs of tech and science startups, 14 are headquartered in Zhangjiang, and 12 of those are chip design companies. The other two are SMIC and equipment supplier ACM Research.

Editors: Tang Shihua, Emmi Laine