Statistics
China chip challenge
Once the world’s fastest-growing chip-manufacturing region, China hit an all-time
low in the first quarter of 2009, with nearly 60 percent of the nation’s semiconductor
manufacturing capacity unused, according to iSuppli Corp.
S
emiconductor
manufacturing capacity
utilization in China fell to
43 percent in the first
quarter, the lowest level since iSuppli
began tracking the market in 2000 and
a massive drop from a recent high of 92
percent in the second quarter of 2004.
This utilization rate comes as a direct
result of low demand spurred by the
global economic downturn. However,
the utilization plunge indicates that
China’s long-nurtured goal of
establishing a vibrant domestic
semiconductor production industry is in
14
serious jeopardy.
“During the last 10 years, the
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Chinese government has worked to
.eur develop a domestic economy that
oasiasemiconductor
would provide the nation with economic
independence,” said Len Jelinek,
director and chief analyst for the overestimation of capacity, which ancillary effect that will significantly
semiconductor manufacturing at was expected to be shuttered in other impact the landscape of companies in
iSuppli. “The establishment of a regions in favour of more efficient China: The bigger company will be
technologically strong Chinese Chinese manufacturing. viewed as the most likely survivor. This
.com
semiconductor industry was considered China’s utilization is expected to perception will transform into reality as
an essential element of China’s long rise moderately through the rest of the customers assure themselves of a
term domestic economic and year, but will remain very low at 54 strong supply source by aligning with
square4
Issue IV 2009
technological independence. percent in the fourth quarter of 2009. the largest, most cost effective
Unfortunately for China, the plan Over the longer term, utilization will semiconductor maker. In the end, the
collapsed as global sales dried up rebound to 84 and 85 percent in 2012 smaller company simply will be forced
before demand generated from internal and 2013. However, when utilization out because it is uncompetitive.
sources was able to grow to match recovers to these levels, China’s With iSuppli not forecasting a
demand generated from the rest of the semiconductor industry will look very recovery for Chinese manufacturers
world. Once viewed by China’s different from how it has in the past, until 2012, it is unlikely that weak
government as a pillar of growth, with the number of competitors in the companies can survive two years in the
semiconductor manufacturing has industry likely to be dramatically face of a cash crisis. iSuppli anticipates
turned out to be a financial burden.” reduced due to consolidation. the first merger in China’s industry will
China’s investments in capacity and “Since Chinese manufacturers don’t be finalized in the second quarter of
technology in the semiconductor sector differentiate from competitors, they are 2009. This will signal that time is of the
have not provided the financial returns at a disadvantage, since there is simply essence if a company or a group of
that were forecast for investors, Jelinek far too much of the same kind of companies is going to be able to
added. Adding to China’s dilemma is capacity in the world chasing after the weather the storm. iSuppli anticipates
same opportunities,” Jelinek said. “This that by the second half of 2010, a
will lead to mergers and consolidation.” smaller, yet stronger, semiconductor
All information kindly supplied by iSuppli Nonetheless, there will be one industry will emerge in China.
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