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China set to grow despite looming IP fears

Posted: 13 Jan 2012 ?? ?Print Version ?Bookmark and Share

Keywords:domestic market? semiconductor? chip consumption? IP protection?

According to a PriceWaterhouseCoopers executive, China is headed for growth. Raman Chitkara expects that the country's technical capability and domestic market will pave the way to increase chip consumption from 40 percent valued at $298 billion in 2010 to about 50 percent.

A PwC report indicated that China makes more than 70 percent of all handsets and PCs and nearly half of all color TVs worldwide. China's chip consumption is still outgrowing the scale and sophistication of its internal chip production, opening a door to future opportunities, added Chitkara, a PwC partner and head of the company's technology practice based in Silicon Valley.

"As China's domestic [systems] market becomes a bigger piece of the pie, if companies want to participate in that they have to have a meaningful local presence in China, and I'm not sure that's fully understood," Chitkara said. "Some people are focused on IP protection and the result may not be fully realizing the potential to play a more meaningful role in China."

Raman Chitkara

"Some people are focused on IP protection and the result may not be fully realizing the potential to play a more meaningful role in China," noted Chitkara.

China's five-year plan includes eight initiatives, in which many focused on increasing its industrial competitiveness and domestic consumption and reducing the technology gap between China and rest of the world. "There's not a single Chinese chip company among its top semiconductor suppliers," Chitkara stated.

So far, China's hopes to become a major chip foundry have been disappointing in scale and sophistication, he said.�The recent consolidation�of China's second and third largest fabs is a step in the right direction, but eased trade restrictions with Taiwan could open the door to that country's foundries lending a bigger hand, he added.

Meanwhile multinationals including Intel and Samsung are opening fabs in China, another opportunity to participate in the country's growth. Intel is by far China's largest chip supplier with local revenues of about $19 billion.

China is already credited for driving down prices of crystalline solar panels, a factor cited in�the recent closure�of Silicon Valley startup Solyndra. The country is also accelerating its production of LEDs, but is not likely to dominate either market, Chitkara said.

From 2008-2010, China's LED production revenue grew by almost 58 percent to more than $4 billion, the PwC report said. As of July last year, there were 69 LED makers in China, 49 in full production, eight ramping up and twelve under construction, it added.

Although most of China's tech companies are still relatively small, the country's financial markets are providing them a platform for growth. "When you look at the global tech IPO forecast you see a rich presence of Chinese companies, the number of which now exceeds those in the US," continued Chitkara.

Indeed, China had 67 tech IPOs in 2010 compared to 19 in the U.S. China accounted for 70 percent of total semiconductor IPOs during 2010, according to the PwC report. Twenty-six of China's 30 IPOs in 2010 were handled by China's stock exchanges, many of them in Shenzhen, the host for nearly half the tech IPOs in 2010. "Ten years ago those IPOs would have occurred on NASDAQ."

- Rick Merritt
??EE Times

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