ICwise's Gu Wenjun on Bridging EU-China Semiconductor Cooperation
The Man Who Brokered STMicroelectronics' Chip Investment in China Believes Face-to-face Meetings and China Visits Are Key to Breaking Barriers
Facing mounting geopolitical tensions and the Biden administration's “small yard, high fence” policy, international semiconductor companies face growing challenges in their China investments. With the prospect of a Trump administration returning to power, some analysts predict even darker clouds over international semiconductor cooperation. Yet, despite these headwinds, STMicroelectronics - Europe's second-largest chipmaker by revenue - has deepened its engagement with Chinese partners. In June 2023, the company announced a US$3.2 billion semiconductor joint venture with China's Sanan Optoelectronics in Chongqing. More recently, on November 20, 2024, it unveiled plans to collaborate with Chinese foundry Hua Hong to supply chips to the domestic market.
Gu Wenjun, the key figure behind these deals, recently shared his insights on EU-China semiconductor cooperation in a thought-provoking op-ed. The article, titled "What STMicroelectronics' Growing China Engagement Tells Us About International Semiconductor Cooperation" (ST加大在华合作对中国半导体国际合作的启示), was published on ICwise's official WeChat account. ICwise (芯谋研究) is a leading research organization specializing in China's semiconductor and electronics industry.
Gu is the founder and Chief Analyst of the organization. Throughout his career spanning nearly two decades, Gu has held various positions in leading semiconductor companies, including SMIC, 3M, Pixelworks, and iSuppli, where he gained extensive experience in R&D, sales, marketing, and research roles. With Gu's kind permission, I am pleased to share an English translation of his thoughts, which provides a rare practical perspective on how semiconductor cooperation could be done.
Below is the translation I made:
Perhaps coincidentally, STMicroelectronics (ST) has been making headlines recently about its China cooperation. On November 20th, ST's CEO, Jean-Marc Chery, announced that Hua Hong Semiconductor would manufacture microcontroller chips for ST. Additionally, reports indicate that ST's joint venture SiC project in Chongqing is progressing well and nearing completion. As the potential Trump 2.0 era approaches, industry experts believe that EU-China semiconductor cooperation should be strengthened. ST's intensified collaboration with Chinese enterprises during this period sets an excellent example for future EU-China partnerships.
Having been involved in both projects, I'd like to share some insights from these cases about advancing international semiconductor cooperation in China. The ST-Chongqing cooperation story began unexpectedly during the 2021 global supply chain crisis when the automotive industry faced severe chip shortages. A Chongqing industrial affairs leader approached me about the local automakers' urgent need for Bosch chips. I contacted Chen Yudong, then President of Bosch China, who was willing to help but faced his own shortage of STMicroelectronics chips. This led me to reach out to my friend Cao Zhiping, STMicroelectronics' Executive Vice President and President of China Operations, whom I knew from our basketball club. Cao expressed willingness to help but needed Semiconductor Manufacturing International Corporation (SMIC)'s support due to capacity constraints.
I arranged a meeting in Chongqing with senior executives from SMIC and Bosch, as well as STMicroelectronics' Cao. Our discussions with Chongqing officials led to collaborations that helped resolve chip shortage issues for Changan Automobile and SERES. More importantly, we explored the possibility of attracting European investment to China, with Cao seeing potential opportunities.
The crucial first step was inviting STMicroelectronics' CEO for an on-site visit to experience China's market vitality firsthand. Despite pandemic-related travel challenges, through joint efforts by the Chongqing government, Cao, and our team, we successfully arranged for STMicroelectronics' CEO Jean-Marc Chery and Global Marketing President Jerome Roux to visit Chongqing in November 2022 - notably the only global tech CEO to visit China during the pandemic period.
During this China visit, STMicroelectronics executives engaged in detailed discussions with strategic customers from the automotive and industrial sectors. Seeing truly is believing - Mr. Chery was deeply impressed by China's market transformation, particularly the dynamism of its new energy vehicle industry. This firsthand experience convinced him to increase investment in the Chinese market. Upon returning to Europe, he decisively pushed forward with plans for manufacturing in China, overcoming various objections.
This top-down commitment enabled rapid progress on STMicroelectronics' Chongqing project. On June 7, 2023, STMicroelectronics announced the establishment of the world's first 8-inch silicon carbide (SiC) production line in Chongqing. This success story owes much to the strong support from Chongqing gov's leadership and the tireless efforts of STMicroelectronics' China management team.
The second case involves the collaboration between Hua Hong and STMicroelectronics, a partnership with deep historical roots. During the previous capacity shortage, I helped coordinate discussions between Cao Zhiping and other STMicroelectronics executives with several domestic fabs, including Hua Hong, which led to various collaborative agreements.
In September this year, STMicroelectronics' CEO Jean-Marc Chery personally attended and delivered a speech at the 10th Zhangjiang Hi-Tech and ICwise Semiconductor Industry Leadership Summit. During his visit, we arranged meetings between him and Hua Hong's leadership. The following day, he led a team to visit Hua Hong's facilities for in-depth discussions, which ultimately resulted in the microcontroller (MCU) foundry partnership.
These two cases highlight several key characteristics of successful international cooperation:
Firstly, domestic enterprises and local governments must strengthen their engagement with international companies, particularly through face-to-face communication. Only in-person interactions enable truly comprehensive and effective dialogue. Such exchanges maximize the potential to break down barriers caused by unfamiliarity and allow for immediate feedback and information exchange. No other form of communication can achieve similar results. Many opportunities emerge through conversations that seem casual but can only truly develop through deep, face-to-face interactions and exchanges of ideas.
Secondly, it's crucial to encourage CEOs and senior executives of international companies to visit China. Given the current prevalence of negative reporting and misunderstandings about China abroad, the most effective way to address these misconceptions is to invite international business leaders to see China firsthand. Let China's genuine vitality convince them. One physical visit carries more weight than ten video conferences; in most cases, foreign visitors can dispel negative preconceptions after just one trip to China. This is why Premier Li Qiang held two face-to-face dialogues with international business leaders this month during CIIE and CPEC, aimed at promoting global supply chain stability and connectivity. The country is now creating more opportunities for international exchange, implementing visa-free policies for many countries to enable more foreigners to experience China's transformation and witness its market scale, vitality, and innovative capacity firsthand.
Reviewing these cases holistically, STMicroelectronics' decisive move to strengthen cooperation with China stems from its leadership's thorough investigation and deep understanding of the Chinese market. On November 20th in Paris, Chery declared that "the missionary era is over" - China's electric vehicle market is now the world's largest and most innovative. "They move faster, and if you're not there, you can't respond in time," he noted, emphasizing that producing chips anywhere else means missing China's rapid EV development. Having local manufacturing capabilities in China is therefore crucial, and STMicroelectronics is now applying technologies and practices learned in the Chinese market to Western markets.
I'm pleased to have played a small role in these collaborations. Jean-Marc Chery personally attended our summit this year and delivered a speech. During the event, I joked that his initials "JMC" could stand for "Join Made in China" - and now they truly have joined. Chery's summit speech was moving - he spoke about thinking like Chinese people and being a "localized" international company. STMicroelectronics aims to be an international company with a "localized" mindset, adapting to local customs and fully understanding the strategies, values, and missions of their host countries.
Currently, both China and Europe face tariff threats, yet share common ground in promoting normal trade relations. Media reports suggest that China and the EU have reached preliminary solutions regarding Chinese electric vehicle tariffs, and there's significant room for cooperation in the semiconductor sector. Compared to the automotive industry, China's chip industry is still developing, while European companies maintain substantial market share in China: ASML's China market revenue accounted for approximately 47% of its total revenue in Q3 2024; Infineon's China revenue represented 27% of total revenue in fiscal 2024; NXP's China market contributed 33% of total revenue in 2023; and STMicroelectronics' Asia-Pacific revenue comprised 57.9% of total revenue in Q2 2024.
The solid market foundation between China and European semiconductor industries will undoubtedly foster more cooperation. Although Chinese semiconductor cooperation with Europe faces significant pressure from the United States, our discussions indicate that European companies are strongly motivated to collaborate with Chinese enterprises, especially as the U.S. pursues decoupling policies. European fabs currently show strong interest in Chinese equipment components and materials. In a conversation, the CEO of a European fab with 12-inch production lines told me, "Chinese equipment components and materials have been validated across dozens of production lines in China, offering guaranteed performance at competitive prices - what reason do we have not to use them?"