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China's chip market rebounds from 2001 slowdown

Posted: 20 Sep 2002 ?? ?Print Version ?Bookmark and Share

Keywords:chip fabrication? wafer? china semiconductor industry association? semiconductor?

Strong domestic demand revived China's chip fabrication industry in 1H of this year, reversing the slowdown seen in 2001. Industry watchers said growth should continue through the end of the year, benefiting local enterprises and global chipmakers alike.

"China has established a semiconductor industry with 10 main fabrication companies, over 10 packaging houses and about 100 design houses," said Xiaotian Xu, secretary general of the China Semiconductor Industry Association (CSIA). The most advanced fabrication technology here is a 0.255m process run on 8-inch wafers, Xu said.

In 1H, China produced 2.6 billion ICs and, with the help of joint-venture partners, sold 2.68 billion units, for growth of 28.7 percent in unit production and 24.7 percent in unit sales over last year's 1H. IC sales topped $751 million during the period, a 45.6 percent increase over the same period last year.

When last year's numbers are compared with those of the boom year 2000, it is clear that the global economic slowdown has slowed China's IC manufacturing industry. Production in the country decreased 4.8 percent from the total for 2000. Sales growth last year came in at a meager 8.9 percent.

But while "the production and sales of global-market-centered chipmakers in China decreased in 2001," said Xu, those targeting the domestic market sustained stable growth. "Sales by some companies, such as Shenzhen SEG-STMicroelectronics and China Huajing Group, grew over 30 percent" in what was a down year overall for the world's chipmakers, Xu added.

Fabs in the works

Xu is confident that IC production and sales in China will reach new heights in 2002. China's economy continues to grow, according to official estimates, and new fabs bankrolled by Motorola in Tianjin and by Semiconductor Manufacturing International Corp. (SMIC) in Shanghai are scheduled to begin volume production before the year is out.

Motorola's huge Tianjin complex includes its MOS17 wafer fab and BAT3 assembly and testing facility. Motorola has invested $3.4 billion in the region thus far, making the operation China's largest foreign-owned electronics enterprise. The operation tallied $4.9 billion in sales last year.

During a ceremony celebrating the company's 10th anniversary in Tianjin, Motorola chairman Christopher Galvin announced plans for a new chip design center at the site. The company plans to build the design center in cooperation with joint venture partner Tianjing Qiangxin Chips Design Co. Ltd.

Pure-play chip foundry SMIC, meanwhile, has said it is ready to provide manufacturing services to global clients. The full capacity of SMIC's Fab 1 is 42,500 8-inch wafers per month.

China remains one to two IC technology generations behind other developed countries. But the growth of its semiconductor sector and its membership in the World Trade Organization has helped local producers and overseas partners alike, observers said.

Local chipmakers only satisfy 20 percent of domestic demand, Xu said, with imported chips supplying the remainder. "Foreign enterprises have become an important part of China's semiconductor industry, and these suppliers are becoming more localized."

Xu said CSIA remains bullish about the future of China's semiconductor industry. He cited three reasons for optimism: Demand is expected to remain strong for the foreseeable future, the government is improving market conditions for chipmakers through favorable tax policies and China's economy continues to grow steadily.

The country is attracting foreign direct investment at an accelerating rate. The chip sector alone is said to have attracted about $10 billion in foreign investment in the past three years.

CSIA hopes to finance construction of an entire semiconductor industry food chain, including front- and back-end operations in such chip manufacturing hotbeds as Shanghai, Suzhou, and other regions.

"The demand for ICs will be 77 billion pieces, (or) $24.2 billion, in 2005," Xu added. "The local industry will play a significant role (in supplying that demand) after new fabs open."

- Sunray Liu

EE Times





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