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SEMI: China could double IC production in 10 years

Posted: 11 Jan 2010 ?? ?Print Version ?Bookmark and Share

Keywords:China IC production? government stimulus? fab?

A recent research by SEMI reported that China is committed to narrow the gap between its IC production and consumption, leading to doubling the country's global equipment and materials market in ten years.

Given the size of the gap and the current policy actions by both national and provincial governments, this means a growing equipment and material purchasing over the next decade.

In addition, new equipment purchasing by multinational chip companies with fabs or packaging and test plants in China will increasingly be made in-country by China R&D and process engineering staffs.

Since China surpassed Japan and the United States in 2007 to become the world's largest consumer of ICs, China policy makers have increasingly voiced concerns about the "chip gap" between supply and demand. In 2008, China consumed approximately one-quarter of the world's ICs, yet manufactured only $5.6 billion in chips, enough to support only 8 percent of their domestic requirements.

By 2011, the China IC market will grow to $85 billion with domestic production expected to reach $8.2 billion, about 10 percent (iSuppli, IC Insights, CSIA). By 2013, China's share of the global chip market will reach 35 percent.

In the past, in markets such as computers, mobile phones, and automobiles, such an imbalance between supply and demand has prompted increased investments in local production capacity.

While some observers expected China's economy to slow following the Beijing Olympics, or become increasingly susceptible to global economic shocks, the Chinese economy continues to growth at robust rates. The International Monetary Fund projects China's GDP to rise 8.5 percent in 2009, despite the global recession, and growing at 9 percent in 2010.

Gov't stimulus
The China government unveiled a 4-trillion-yuan ($586 billion) stimulus package in November 2008, with the funds to be distributed through 2010. In addition to investments in the macro economy, the Chinese government also remains the biggest investor in the semiconductor industry in China.

In the past five years, the China government influenced the investment of about $7 billion in new fabs. In the next five years, local government will likely continue to be the significant co-investor in strategic IC Fab projects throughout the country. Going forward, the central government may also invest up to $30 billion on semiconductor (semiconductor equipment and material are included), also software and high-end chip hardware industry by 2020.

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