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iSuppli: Setbacks in some China IC firms linger

Posted: 21 Nov 2008 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? chip?

More than 550 fabless semiconductor companies are competing in China today, but about 100 of them will close shop within the next two years, according to market research firm iSuppli Corp.

"Many companies presently are seeking buyers and a total of four companies already have been acquired by foreign IC firms during the past 12 months," said Vincent Gu, China research analyst, iSuppli. "China's fabless IC industry is polarized with about 50 companies achieving success and the remainder struggling to survive," he added.

Most of China's fabless companies are young and small, iSuppli said, and more than 88 percent will generate less than $10 million in revenue during 2008.

"Some companies are losing money and have no mature products available to deliver the revenues needed to continue doing business," Gu said. "Most companies have announced layoffs, cut production lines or have shut down entirely," he added.

After years of double-digit annual growth, China's semiconductor sales revenue in 2008 is expected to rise by only 6.7 percent to reach $81.7 billion, up from $76.6 billion in 2007, iSuppli predicts. "But China's fabless IC industry is expected to perform better, by 12.3 percent to get $3.5 billion in 2008," the firm said.

"This growth in fabless IC revenue is being driven by domestic sales of wireless and consumer electronics products, rather than by exports," Gu said.

China's domestic market situation improved in 2008 despite regulatory restrictions and an incomplete supply chain, according to iSuppli. "Popular applications backing new domestic standards will appear in 2009 as the country's industrial ecosystems mature," the company said.

"Continued revenue growth for China's IC industry is expected in 2009, despite substantial economic uncertainty," it added.

Losing funds on the rise
"The majority of China's IC firms are short of capital and face cash flow problems," iSuppli said. The launch of another stock market in Shenzen has been postponed because of the global economic financial crisis, it added, and venture capitalists generally lack interest in China's IC industry. But iSuppli expects at least five companies will seek initial public offerings on the Nasdaq stock exchange and at least 10 companies will be involved in mergers next year.

A new iSuppli report, Semi Suppliers of Leading OEMs: A Closer Look at Risk Management, is now available through the firm's Website.

China's IC sales revenue is expected to reach $81.7 billion this year. (Click on image to enlarge.)

A separate report issued by consulting firm PricewaterhouseCoopers concluded that IC usage by electronics makers in the China market increased by 23 percent in 2007, when China used more than one-third of the chips developed worldwide for the first time.

- Dylan McGrath
EE Times

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