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China's IC demand outpaces production

Posted: 28 Mar 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Mark LaPedus? The Information Network? Microsoft? Sony? China?

The sky appears to be falling amid setbacks at Microsoft Corp. and Sony Corp. But in China, the nation's growing chip consumption continues to outpace its domestic fab productionby a wide margin, according to market research firm The Information Network.

The supply-demand gap appears to be widening, the firm said. China's IC demand grew 32 percent to $45 billion in 2005, but internal chip production reached only $9 billion despite ongoing massive semiconductor fab construction in that nation.

In 2005, China produced 22 billion ICs, which accounted for only 20 percent of domestic demand. In 2005, the country consumed 87 billion ICs. Most high-end products used in computers and mobile phones had to be imported, according to the firm.

Massive building programs resulted in IC capacity increases by 31 percent to 128.7 thousands of 200mm equivalent wafer starts per week (kwspw) in 2005. The figure for 2006 is projected to be 156.8 kwspw, a 22 percent increase. The analysis is based on 43 fabs the firm is tracking built or planned between 2004 and 2008.

"While demand for ICs was $45 billion in 2005, domestically produced ICs only reached $9 billion, a shortfall of $36 billion worth of ICs that needed to be imported," said Robert Castellano, president of The Information Network, in a statement. "The supply/demand gap will widen to $44 billion in 2006."

Microsoft this week said it would delay general availability of Vista, the next major upgrade to the Windows operating system, until January 2007, a move that's expected to have some impact on consumer PC sales. Sony, on the other hand, has recently delayed the introduction of the Playstation 3 game machine to November, or about six months later than expected.

And spot softness in demand and slower-than-expected price drops could signal a weakening of the LCD TV market in coming months, according to a report by at least one New York-based investment firm.

During its annual shareholders meeting this week, Mike Splinter, president and chief executive of Applied Materials Inc., projected that the worldwide front-end semiconductor equipment market would hit $30 billion in 2006, up 15-to-20 percent over 2005.

Splinter was also upbeat about the flat-panel display equipment market, which was originally supposed to show little or no growth in 2006. The flat-panel display, and equipment markets have "exceeded our expectations," he said during the shareholders meeting.

And there's renewed optimism among some vendors. In a scheduled 8-K filing, Ultatech Inc. raised its March quarter guidance, while keeping the 2006 forecast unchanged, said analyst Avinash Kant of Canaccord Adams Inc. Ultratech said Q1 revenues would likely come in down 5-to-15 percent sequentially, verses the company's previous guidance of down 10-to-15 percent.

- Mark LaPedus
EE Times

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