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China, India to dominate IC industry, forecasts Gartner

Posted: 27 Sep 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Gartner? China? India? semiconductor industry? Jonathan Hopfner?

The Asia-Pacific region will cement its status as the center of the global semiconductor industry during the next five years, as manufacturing, consumption and intellectual property (IP) will be increasingly concentrated in China and India, analysts said early this week.

China is expected to dominate regional semiconductor output in the years ahead, capturing more business from traditional industry hubs like Taiwan, Malaysia and South Korea, Philip Koh, a Singapore-based research vice president with analyst firm Gartner, told the Gartner Semiconductor Roadshow conference. According to Koh, China will account for 60 percent of the $118 billion Asian semiconductor market by 2010, up from 49 percent today.

While a focus on high-end solutions and cutting-edge research and development mean they will continue to play a role in the market, all other countries in Asia will see their shares stagnate or dropfrom 11 percent to 6 percent in Taiwan's case.

A potent combination of government incentives, more sophisticated design capabilities, better brand quality and strong local consumer demand "continue to drive electronics players to set up plants in China," Koh said.

China is also at the center of a "huge increase" in outsourcing to Asia, with electronic manufacturing services providers and original design manufacturers based in the region expected to account for 20 to 40 percent more of the global output of consumer goods, such as LCD TVs, digital media players and mobile phones, by 2010.

Gartner believes the greatest competition to China will come from India, which boasts a larger pool of highly educated and English-speaking engineers, as well as a burgeoning middle class. But Koh said the country's prospects could be hurt by a weak infrastructure and limited government support.

In addition, India represents a "huge potential market" with its proximity to China and Southeast Asia, as well as a "good testing ground for mainstream semiconductor process technologies, before transitioning to high-end, state-of-the-art processes," he said.

Expect innovations
Gartner analyst Christian Heidarson noted that the industry should also expect more IP innovations from Chinese and Indian companies. In China, fabless ASSP vendors like Solomon Systech and Actions Semiconductor "are targeting international markets," he said. India, meanwhile, already boasts one of the world's top IC design houses in Wipro Technologies and can build "on an outsourcing heritage and strength in software design."

With rising design costs pushing the growth of the third-party IP industry, Heidarson said prospects were bright for regional design houses that can match their technologies to user needs.

Kay-yang Tan, principal semiconductor analyst at Gartner's Singapore practice, said China's share of the foundry market is also growing at a breakneck pace, mainly at the expense of Japanese and European producers.

The competitive threat from China, combined with the design complexity of sub-100-nanometer production and the industry's more "consumer-centric" nature compressing product life cycles, will force manufacturers to cut costs and seek out more research and development design partnerships, Tan said.

Tan claimed supply conditions in the market remained relatively benign, with lean inventories and relatively conservative capital expenditure in most companies resulting in a "low risk of immediate excess." The exception, however, to this positive outlook remains the memory market, where Tan said spending "is hot and of concern."

Gartner is predicting "moderate" growth of around 10 percent for the semiconductor industry in 2006 and 2007.

- Jonathan Hopfner
EE Times

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