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Report: China Q1 fab utilization plunges to 43%

Posted: 22 Apr 2009 ?? ?Print Version ?Bookmark and Share

Keywords:China fab utilization? semiconductor industry? IC manufacturing?

China's Q1 semiconductor fab utilization rate dropped to a new low, posting only 43 percent, according to market research firm iSuppli Corp.

The Q1 utilization rate was the lowest since iSuppli began tracking the market in 2000 and a massive drop off from 92 percent as recently as Q2 04. The drop in utilization was a direct result of low demand spurred by the global economic downturn, and indicates that China's goal of establishing a vibrant domestic semiconductor production industry is in serious jeopardy, the marker research firm said.

Over the past year, analysts have openly questioned China's commitment to its stated goal of becoming a chipmaking power as its IC companies have stumbled. EE Times reported last year that the mad rush to cash in on the emerging Chinese semiconductor/electronics industry is slowing down.

Len Jelinek, director and chief analyst for semiconductor manufacturing at iSuppli, said in a statement that the Chinese government has worked for 10 years to develop a domestic economyincluding strong semiconductor technologythat would provide economic independence.

"Unfortunately for China, the plan collapsed as global sales dried up before demand generated from internal sources was able to grow to match demand generated from the rest of the world," Jelinek said. "Once viewed by China's government as a pillar of growth, semiconductor manufacturing has turned out to be a financial burden."

Slow recovery
China's investments in capacity and technology in the semiconductor sector have not provided the financial returns that were forecast for investors, Jelinek said. Adding to China's dilemma is the overestimation of capacity, which was expected to be shuttered in other regions in favor of lower-cost, more efficient Chinese manufacturing.

China's utilization is expected to rise moderately through the rest of the year, but will remain very low at 54 percent in Q4 09, iSuppli forecast. Over the longer term, utilization will rebound to 84 and 85 percent in 2012 and 2013, the firm said, but China's chip industry will look very different than the past due to anticipated consolidation.

"Since Chinese semiconductor manufacturers do not possess a technological differentiation from their competitors, they are at a disadvantage, since there is simply far too much of the same kind of capacity in the world chasing after the same opportunities," Jelinek said.

With iSuppli not forecasting a recovery for Chinese manufacturers until 2012, it is unlikely that weak companies can survive two years in the face of a negative cash flow, the firm said. It predicted that the first merger in China's semiconductor industry will be finalized in Q2 09.

iSuppli is offering for sale through its Website Jelinek's new report, entitled: China's Semiconductor Industry in Serious Jeopardy.

- Dylan McGrath
EE Times

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