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China fabless firms revenue to grow to $10.7B in 2015

Posted: 06 Jun 2011 ?? ?Print Version ?Bookmark and Share

Keywords:fabless companies? semiconductor market? revenue growth?

Fabless semiconductor companies in China will generate $10.7 billion in revenues in 2015, double their $5.2 billion earnings last year, as the semiconductor market continues to register high-growth rates fed by flourishing exports of consumer and communication chipsets.

According to the latest research report by market intelligence company IHS iSuppli, the industry's high-growth rate stemmed from a 23.6 percent expansion in 2010 that boosted revenues from $4.2 billion in 2009 and by 11.3 percent from 2010 to reach $5.74 billion in 2011.

According to IHS, last year's nearly 60 percent surge in shipments of China-designed mobile handsets, coupled with the booming demand for semiconductors used in cellphones, benefitted China's fabless companies in 2010.

China's fabless industry

Among the companies that capitalized on last year's massive growth!posting $346 million in revenues!was China-based fabless supplier Spreadtrum Communications. Spreadtrum successfully designed a range of semiconductors for cellphones, including core chipsets, radio frequency transceivers and total wireless solutions for mobile handsets.

As the first fabless semiconductor supplier in China to generate revenues that surpassed the $300 million mark, IHS noted that Spreadtrum is likely to retain its market leadership this year and register revenues of more than $500 million.

IHS said, in order to generate and sustain future growth, China's fabless companies are likely to focus on what IHS calls the three "Cs," namely, China, consumer and convergence. This means that the companies will need to focus on the domestic Chinese technology industry, allowing them to cash in on the expansion of the burgeoning market, and to leverage China's home court advantage!the country's vast consumer base.

In addition, the IHS's report stated that China's fabless semiconductor suppliers must also focus on consumer electronics because the major characteristics of this market!technology, price and quality!play into the strengths of Chinese chip designers. Furthermore, China's fabless suppliers must now also converge or merge their products' features, a trend influenced by the rising popularity of smart phones and tablets, and pay attention to the changes in industries and business models that may result from these merged features.

IHS said, however, that to be able to outdo their worldwide competitors, China's fabless firms must also pay attention to three more "Cs," which are culture, content and contribution.

First, the companies must accommodate and adjust to the differing cultures of overseas customers; next, they must learn more about end-content sectors that drive the growth of technology markets; and finally, they must take advantage of government contributions to the industry, given Beijing's favorable view of the industry which has led to the institution of a range of policies to improve the fabless industry in various areas, including investments, favorable tax rates and capital investments.

And yet, despite strong growth prospects for the fabless industry in China, the companies will face and must hurdle several obstacles, the report said, which include the industry's difficulty in penetrating the market for logic semiconductors, the short supply of both foundry and assembly capacity in the first half of 2010, and difficult-to-obtain capacity given the small size of domestic fabless suppliers.

Aside from these, the report said that the semiconductor industry must also contend with an oligopolistic structure, with market shares being dominated by a small group of large competitors, and with the very small size of China's fabless companies making it much harder for them to compete with worldwide giants.

Nonetheless, a bright spot for China's fabless industry is the increased support that it enjoys from the government, which launched this year a new and more flexible policy on the software and IC industry, apparently setting it on a fast track to growth in the near future.

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