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Study: China uses 1/3 of '07 global ICs

Posted: 20 Nov 2008 ?? ?Print Version ?Bookmark and Share

Keywords:market? chip? manufacturer?

Semi usage by electronics makers in the China market increased by 23 percent last year, when it consumed for the first time, more than a third of the ICs developed worldwide, based on a report provided by PricewaterhouseCoopers (PwC).

Brought by growth in electronics manufacturing, China has become the dominant consumer of semiconductors with the total usage estimated at $88 billion in 2007, according to the report, China's Impact on the Semiconductor Industry: 2008 Update.

"Semiconductor consumption in the China market is growing at a faster pace than what the industry anticipated," said Raman Chitkara, global semiconductor leader at PwC, in a statement.

"But growth in IC production in China is not keeping pace with its use," he added. "While the China government is implementing initiatives in the hope of increasing local production, we predict that this disparity is likely to continue in the near future," he noted.

The report said export growth is the dominant driver of consumption of semiconductors in China. About 69 percent of chips used in China in 2007 were integrated in various electronics products developed for export, up from 64 percent in 2005, it added.

No leading players yet
"The China semiconductor industry remains widely scattered with no dominant players," PwC said. "This is likely to change as the China semiconductor industry further matures within the next five years with the likely emergence of a dominant player in the market," it added.

This assumption contrasts with the opinion advanced by Bill McClean, president of market research firm IC Insights Inc. Earlier this year, McClean asked China's commitment to semiconductor manufacturing as some of the country's top chipmakers have hit the skids.

Semiconductor Manufacturing International Corp. (SMIC) is the largest manufacturer of chips in China and the fourth-ranked foundry in the world by revenue. But SMIC has struggled in recent quarters, leading to speculation about its future. Last week, it received a $172 million investment from Datang Telecom Technology & Industry Holdings Co. Ltd.

China's impact cited the top China IC companies but excludes wafer foundries because they don't design and sell chips as their own. According to the PWC report, the top indigenous China chip company for 2007was HiSilicon Technologies Co. Ltd, with revenue of about $170 million.

China's presence
The revenue threshold for PWC's ranking of the largest China IC companies increased from $20 million in 2005 to $30 million in 2007, yet the number of qualifying companies remained at 29, according to the report.

The report claimed China chip companies are often overlooked in IC market share reports compiled by industry analysts.

According to the PwC report, buying decisions for semiconductors used by the electronics manufacturing industry in China are often made outside the country in places like Taiwan and Japan. PwC said it predicts that as the China industry matures, this business practice will decrease, benefiting the companies with greater local presence in China.

While many of the largest semiconductor suppliers to the China market are multinational companies, 32 of the top 70 global suppliers have below average market penetration in China, the fastest growing IC market in the world, according to the report.

"Over the near term, established multinational IC companies may find an unparalleled market opportunity in China, but over the long term the widening gap between consumption and production of semiconductors represents a domestic industry void that will inevitably be filled," Chitkara said.

- Dylan McGrath
EE Times

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