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REGIONAL ROUNDUP
Designed in China: Domestically
conceived chip market booms in nation
A
lthough China’s players were the second largest from $75 billion in 2007, iSuppli Corp.
semiconductor application, buying $2.2 billion worth of predicts. Consumption is expected to grow
purchasing boom is semiconductors. at a 7.7 percent CAGR from 2007 to
cooling down, the nation’s demand for Mobile handsets will remain the 2012. In contrast, China’s overall
locally designed chips is heating up, with largest application through 2012, when semiconductor consumption grew at a
domestic consumption expected to rise by the area will consume $9.8 billion worth CAGR of 27.7 percent from 2001 to 2006.
more than 60 percent from 2007 to of domestically designed chips. Notebook This year is a difficult one for Chinese
2012, according to iSuppli Corp. PCs by 2012 will become the second electronic equipment producers, especially
By 2012, $42.1 billion worth of largest area for domestically designed smaller manufacturers.
Chinese designed semiconductors will be semiconductors, with $3.4 billion worth China’s central government has
purchased for use in electronic equipment of consumption for the year. adopted a tight monetary policy to avoid
made in the nation, up 63.4 percent from The fastest growing segment for overheating the economy, even while it
$25.8 billion in 2007. domestically designed semiconductors reduced export tax rebates. Furthermore,
The attached figure presents iSuppli’s over the next few years will be mobile the increasing value of the Chinese yuan
forecast of purchases of locally designed communications infrastructure equipment, is placing great pressure on domestic
semiconductors in China. These figures do which will experience a 24.9 percent companies producing low end electronic
not account for localised design work by Compound Annual Growth Rate (CAGR) equipment. Furthermore, operating and
foreign companies operating in China, from 2007 to 2012. Next fastest will be labour costs are still rising, along with
including those based in Taiwan. LCD TVs, which will achieve a 21.8 prices for food, gasoline and electricity.
“The growth of China's semiconductor percent CAGR during the same period. Higher inflation, a weakened equity
consumption has slowed since 2005,”
said Kevin Wang, senior manager for
China Research at iSuppli. “The main
reason is that foreign electronic equipment
makers have decelerated the pace of their
manufacturing outsourcing to China. This
is having a negative impact on China’s
electronic equipment manufacturing and
semiconductor industries. China’s
semiconductor industry now is undergoing
a transformation, with an increased focus
on designing chips for electronic products
that are popular in the nation.”
Demand for these locally designed
chips is being driven mainly by China and
Hong Kong based electronics OEMs and
contract manufacturers. However, foreign
Original Design Manufacturers (ODMs) Chinese manufacturers that market and the devastating earthquake in
that develop and manufacture goods for concentrate on other consumer electronics Sichuan province negatively affected
Chinese OEMs also are contributing to products, such as Digital Set Top Boxes domestic market demand for electronic
the growth. (D-STBs) and white good appliances, also equipment in the first half of 2008.
“In the electronics industry, China will increase their spending on iSuppli anticipates that the market will
often is seen simply as a low cost domestically designed chips during the be in a readjustment period for the
manufacturing region,” Wang said. coming years. Other expanding remainder of 2008 and in 2009. Small
“However, the rise of the semiconductor application areas will include car companies without strong R&D
design business in China shows that the infotainment products and security capabilities will exit the market. At the
nation’s high tech future increasingly will systems such as surveillance devices, same time, many leading Chinese OEMs,
reside in capitalising on local brainpower smoke detectors and door security systems. such as Huawei and ZTE, will grow larger
to produce innovative products that The boom in locally designed by aggressively targeting international
appeal to the domestic audience.” semiconductor usage in China comes at a markets. Meanwhile, Chinese Independent
Mobile handsets were the largest time of deceleration for the nation’s Design Houses (IDHs) are expected to
application for Chinese designed overall chip consumption. acquire more international clients.
semiconductors in 2007, consuming $4.4 China's consumption of all kinds of The information in this article was
billion worth of chips for the year. semiconductors is expected to expand to derived from iSuppli’s China Application
Portable Media Players (PMP)/MP3 $81 billion in 2008, a 7 percent increase Market Forecast Tool (AMFT).
www.euroasiasemiconductor.com September 2008
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