By Hu Shiming, CNCIC

Electronic chemicals are special (fine) chemical materials for electronic information products manufacturing. They are characterized by numerous varieties and specifications, high technical barriers, rapid product upgrading, high customer threshold, and high concentration of industry subdivisions.
   Major end-use applications of electronic chemicals include semiconductors (mainly integrated circuits, IC), flat panel displays (including liquid crystal display, LCD, organic light emitting diode display, OLED, etc.), printed circuit boards (PCB) and new energy batteries. Table 1 shows the categories of electronic chemicals in different application fields.

Electronic information industry development

   The added value of China’s electronic information manufacturing industry above designated size increased by 7.2% year on year in January-September 2020, with the growth pace only down by 1.7 percentage points year on year. The coronavirus pandemic has given a boost to some industries, such as 5G, big data application/computing, artificial intelligence (AI), intelligent transportation system (ITS), smart healthcare and smart monitoring etc., which will create new growth room for the electronic information industry.   
   1. Semiconductors (IC)
   World sales revenue of semiconductors hit a record high of US$468.8 billion in 2018 and slipped by 12.1% year on year to US$412.3 billion in 2019, due to the periodic adjustment of the memory market. In 2020, the semiconductors market regained its steam. Emerging applications, including AI, quantum computing, 5G, IOT and smart city are growth drivers of the future development of the semiconductors industry. However, as the pandemic disrupted the world economy and supply chain, the semiconductor market is estimated to only increase by 3.3% in 2020 and rise by 6.2% in 2021. Figure 1 shows the sales revenue and forecast of the world semiconductors industry in 2010-2021.

Figure 1 World semiconductors sales revenue and forecast

   China’s net import value of chips reached US$204 billion in 2019 but its self-sufficiency rate was only around 30%. China has a high reliance rate of high-end chip imports. In August 2020, the State Council issued the "Policies to Promote the High-quality Development of the Integrated Circuit Industry and Software Industry in the New Era", clearly stating that all integrated circuit companies and software companies established in China can enjoy relevant policies as required. In addition, the capital market is also very supportive of domestic chips. Chip companies such as SMIC and Cambricon are listed on the Sci-Tech Innovation Board. 
   2. FPD
   As the display terminal of the Internet of Things (IOT), the flat panel display (FPD) has become the mainstream development direction of display technology. Boasting low working voltage, low power consumption, high resolution, good anti-interference, wide application range and low cost, LCD has become a mainstream product in the FPD industry. In the smart phone market and some emerging applications such as wearable electronic devices, OLED panels are gradually replacing thin-film transistor liquid crystal display (TFT-LCD) panels as a new choice for device manufacturers. Figure 2 shows world FPD industry scale and forecast in 2016-2022.

Figure 2 World FPD industry scale and forecast in 2016-2022

   World FPD producers concentrate in mainland China, Taiwan province, South Korea and Japan. Mainland China accounted for 34% of global FPD capacity in 2017 and the share is predicted to increase to 56% in 2022, after vast capacity expansions during 2018-2019.
   3. PCB
   PCB is irreplaceable in the entire electronic product portfolio and any electronic equipment or product needs to be equipped with PCB. World PCB industry scale increased by 8.5% year on year in 2017 and rose by 6.0% year on year in 2018 but shrank by 1.4% in 2019 with the output value at US$61.5 billion. The output value is expected to reach US$74.8 billion in 2024, with the annual growth rate at around 4.0% in the coming years.
   China’s PCB industry scale stood at around US$32.8 billion in 2019. The output value of the PCB industry in mainland China rose by 5.6% annually on average in 2010-2019 and the growth rate is predicted at 4.4% in 2019-2024. Figure 3 shows PCB industry scale and forecast in 2010-2019.

Figure 3 World and China PCB industry scale and forecast

   4. Solar battery
   China’s installed photovoltaic power generation capacity was 30.1GW in 2019, accounting for one fourth of the global installed capacity. China’s cumulative photovoltaic power generation capacity reached 205GW by the end of 2019, accounting for 10.2% of the national power installed capacity, and the power generation capacity reached 224 billion kWh, accounting for the 3.1% of the national total. In 2019, China's solar cell output was 108.6GW, with an average annual growth rate of 29% from 2010 to 2019; the output is expected to reach 184GW in 2023, with an average annual growth rate of about 14% from 2019 to 2023. Figure 4 shows China’s solar cell output and forecast in 2010-2023. 

Figure 4 China’s solar cell output and forecast

Electronic chemicals market development

   China’s electronic chemicals production concentrates on medium and low-end products and high-end products are heavily reliant on imports. Fast growing demand and localized procurement trends will continue to boost the development of China’s electronic chemicals and the localization rate will increase steadily. 
   1. Electronic gas
   The scale of China's electronic gas market is about RMB10.2 billion, and the growth rate is expected to exceed 14% in the following three years. Electronic gas has high technical and market barriers. The overall localization rate in the semiconductor field is about 10%, and that in the FPD field is about 25%. Almost all solar cells and LEDs are domestic products. Table 2 shows the market scale by applications. 

   2. Wet electronic chemicals
   In 2019, the market size of wet electronic chemicals used in the world’s three major application markets of semiconductors, FPDs and solar cells is around RMB47.7 billion, and is expected to grow by about 7.4% in the next three years. China’s wet electronic chemicals market size is about RMB9 billion and the growth rate will exceed 14% in the coming three years. The overall localization rate in the domestic semiconductor field is around 25%, and that in the FPD field is about 35%. Almost all solar cells are domestically made. Table 3 shows the market size of wet electronic chemicals by applications.

   China’s wet electronic chemicals consumption from the semiconductors, FPDs and solar batteries totalled around 1.21 million tons in 2019, respectively taking a share of 32%, 39% and 29%. Domestic demand for wet electronic chemicals will reach 1.5 million tons in 2020, up by 24% year on year. The three major markets are likely to post a notable demand growth. The demand is estimated at around 650 kt, 450 kt and 400 kt respectively from the FPDs, semiconductors and solar batteries.
   3. Photoresist
   The market size of photoresist used in the three major markets, semiconductors, FPDs and PCB reached around RMB31.3 billion worldwide in 2019, with the growth rate predicted at around 4.9% in the coming three years. China’s photoresist market size stood at around RMB13.4 billion in 2019 and the growth rate may exceed 8% in the following three years.

   The overall localization rate of photoresist in the semiconductor field is about 5%. The localization rate is 100% for sulfonated rubber photoresist and around 15% for g-line/i-line photoresist. Almost all KrF/ArF photoresist are imported. The overall localization rate of photoresist in FPD field is about 10%. The localization rate is around 35% for touch screen photoresist and 5% for color and black photoresist. Most TFT positive photoresist are imported. The overall localization rate of photoresist in the PCB sector is about 20%. The localization rate is around 5% for dry film photoresist, 50% for wet film photoresist and 50% for photoimageable solder mask ink. Table 4 shows the market size of photoresist by applications.

   In terms of the downstream distribution of various types of semiconductor photoresist, g-line/i-line glue is currently mainly used in power semiconductors and sensors, while KrF glue is mainly used in memory chips, and ArF is mainly used in logic chips and manufacturing of high-end memory chips. Among them, ArF (dry/wet) glue corresponds to the current advanced IC manufacturing process. With the application of double/multiple exposure technology, the usage of photoresist increases, and demand for ArF photoresist will accelerate. ArF photoresist will remain the mainstream product before EUV technology matures. The i-line market will continue to grow in line with the continuous expansion of the power semiconductor, sensor, and LED markets. As the demand for refinement increases, i-line photoresist will be replaced by KrF photoresist, and demand for KrF photoresist will pick up further.

Development trends

   The localization of premium key electronic chemicals are poised to be a general trend with the localization of electronic products such as integrated circuits and FPDs. Meanwhile, domestic products are gradually capable of replacing the imported products, thanks to the support of China’s national policies and technological breakthroughs made in the electronic chemicals industry. Product grade and quality have been greatly improved, and domestic enterprises have begun to supply some high-end electronic chemicals stably. 
    Electronic chemical manufacturers need to provide integrated technology services and product upgrading services as well as other solutions according to the overall production process and customized design requirements proposed by downstream enterprises. In the context of the upgrading of the supply-side structure of the global manufacturing industry, the downstream application market will tend to be non-standard. Industry competition will gradually focus on competition of comprehensive service capabilities.