1、 Industry Overview

CPU, short for Central Processing Unit, is made up of ultra large scale integrated circuits and serves as the computational and control core for computers. The CPU includes modules such as arithmetic unit, controller, cache memory, internal data bus, control bus, and status bus input/output interface.

The main function of a CPU is to interpret computer instructions and process data in computer software, retrieve instructions from memory or cache, place them in instruction registers for instruction decoding, decompose instructions into a series of micro operations, connect them to various CPU module components capable of performing the required operations, send control commands, and thus complete the execution of instructions.

CPU is a huge family, which can be divided into two categories according to instruction sets: CISC (Complex Instruction Set) and RISC (Reduced Instruction Set). CISC CPUs are currently mainly based on x86 architecture, while RISC CPUs mainly include ARM, RISC-V, MIPS, POWER architecture, etc. In addition, according to the application field, microprocessors can be roughly divided into three categories: general-purpose microprocessors (MPU, Micro Processor Unit), microcontrollers (MCU, Micro Controller Unit), and dedicated processors, while CPUs belong to general-purpose microprocessors.

The upstream of the CPU industry supply chain is the semiconductor material and equipment supply chain, mainly including semiconductor materials such as silicon wafers, electronic specialty gases, photoresist, target materials, as well as single crystal furnaces PVD、 Semiconductor equipment such as lithography machines and detection devices. The midstream of the industrial chain includes the design, manufacturing, and packaging testing of CPU chips, with representative manufacturers such as Weir Group, Ziguang Spreadtrum, Huada Semiconductor, Juxin Technology, National Technology, Beijing Junzheng, Loongson Zhongke, Quanzhi Technology, Guoke Microelectronics, Ziguang Guowei, and Guoxin Technology. The downstream of the industrial chain is the application field of CPU chips, mainly including PCs, tablets, communication and smartphones, smart wearables, automotive electronics, industry, medical, etc.

2、 Industry Status

The important application areas of CPUs include desktops and servers, with each desktop typically having only one CPU and each server having an indefinite number of CPUs. With the comprehensive arrival of the digital age, the demand for high-performance CPUs continues to rise in both consumer electronics fields such as personal computers and smartphones, as well as enterprise servers and cloud computing. For example, in the fields of gaming and graphics processing, a powerful CPU is needed to ensure a smooth running experience; In enterprise data centers, efficient and stable server CPUs are the key to ensuring the normal operation of business. In this context, the scale of China's CPU chip market is showing an accelerated expansion trend. According to statistics, the size of China's CPU market has grown from 150.574 billion yuan in 2019 to 216.032 billion yuan in 2023. According to preliminary estimates, it will further increase to 232.61 billion yuan in 2024.

The CPU market is mainly composed of three parts: desktop CPUs, mobile CPUs, and server CPUs. Different types of CPUs are applied in different scenarios, and with the acceleration of digitalization, the demand for computing power in various fields continues to grow, which will continuously drive the expansion of the market size of these three types of CPUs. From the perspective of market share, currently in China's CPU market, desktop CPU chip products occupy the largest market share, accounting for 50%; Secondly, it is mainly used for desktop CPU chips in personal computer products such as desktops and laptops, with a market share of 30%; In addition, it is the server CPU, which holds a market share of 20%.

3、 Competitive landscape

At present, there are more foreign companies in China's CPU market, and the market share of local companies is relatively small. Among them, Intel and AMD respectively occupy 50% and 30% of China's CPU market share, while domestic CPU manufacturers Huawei and MediaTek occupy 10% and 5% of the market share, far lower than the market share of foreign manufacturers. With the advancement of technology and policy support, domestic CPUs are expected to gain a larger market share in the future. Meanwhile, with the development of emerging technologies such as cloud computing, big data, and artificial intelligence, the demand for high-performance CPUs will continue to increase, bringing new growth opportunities to China's CPU market.

In recent years, with the increasing support of national policies, the investment heat in the semiconductor industry by market capital has been rising, and the number of participants in the domestic CPU chip market has been increasing. The performance level of domestic CPU chips continues to improve. From the perspective of technical architecture, China's CPU industry has formed a diversified technological path, including different instruction set architectures such as Arm, x86, LoongArch, SW64, and RISC-V. Behind them are many enterprises dedicated to CPU research and development, such as Huawei, Feiteng, Haiguang, Zhaoxin, Loongson, Shenwei, and Pingtouge.

4、 Development Trends

a. Accelerating technological innovation will continue to lay the foundation for industrial development

China's CPU industry has made significant progress in technological innovation, especially in the development of independent instruction systems and core IP. For example, Loongson Zhongke has launched its own instruction system LoongArch, which combines the characteristics of mainstream instruction systems such as X86 and ARM. Through efficient binary translation, it can achieve compatibility with X86 and ARM application software. Haiguang Information has achieved advanced levels in CPU microarchitecture and system design by deeply mastering the x86 instruction set code and innovatively expanding the core instruction set, successfully creating the domestically produced C86 instruction system. These technological innovations not only enhance the performance and compatibility of domestic CPUs, but also lay the foundation for future sustainable development.

b. The market competition is becoming increasingly fierce

At present, the competition pattern of China's CPU market presents a diversified feature, mainly divided into three tiers: the first tier includes Haiguang and Kunpeng, which are in a leading position in the industry with rich orders and high market share in the Xinchuang PC market; The second tier includes Loongson and Feiteng. Loongson has demonstrated strong competitiveness in the party and government fields, while Feiteng has gradually emerged in the commercial market; The third tier includes Zhaoxin and Shenwei, which occupy a place in the market with their respective advantages. In the future, with the continuous advancement of technology and the growth of market demand, competition among domestic CPU companies will become more intense, and the competition for market share will also become more intense.

c. Continued favorable policies for industry development

In recent years, the national and local governments have introduced a series of policies to support the development of the CPU industry. For example, "Made in China 2025" proposes to focus on developing the chip design industry, accelerating the development of the chip manufacturing industry, enhancing the development level of advanced packaging and testing industry, and breaking through key equipment and materials for integrated circuits in response to national strategies and industrial development needs. In addition, the "Action Plan for High Quality Development of Computing Infrastructure" jointly issued by the Ministry of Industry and Information Technology and six other departments also provides policy guarantees for the development of domestic CPUs. These policies not only provide financial support for CPU companies, but also encourage them to increase research and development investment and enhance their independent innovation capabilities through tax incentives, government subsidies, and other means, which will continue to benefit the development of the industry.