China chip market on track for 20% growth, may be headed for 'bubble' status
By Colleen Taylor, Contributing Editor -- EDN, May 30, 2007
Analysts from market research firm iSuppli Corp. predict that China's semiconductor market growth is expected to continue its acceleration in 2007, but warn that today's boom in the region could well lead to tomorrow's bust.
Semiconductor shipments in China are set to rise to $51.7 billion in 2007, up 20 percent from $43 billion in 2006, Byron Wu, director and principal analyst of China research for iSuppli said in a recent speech at the World Semiconductor Trade Statistics (WSTS) Spring 2007 committee meeting in Shanghai. This compares to 15 percent revenue growth in 2006.
But according to Wu, while such accelerated growth may seem to be positive, there are some concerns that the Chinese technology industry and the overall economy are entering a stage of "unsustainable hyper-expansion" that could generate a market bubble.
"The major theme for China in 2007 is overheating," Wu said in his speech. "There's concern over whether Chinese electronics OEMs will continue expanding their sales, whether buying power will continue to increase among consumers and whether exports will remain on the rise. At the macro level, there's increasing concern that the overheating economy could bring a disastrous bubble that could derail China's stock and real estate markets."
Although there is a need for industry players to be vigilant about the threat of another market bubble, Wu said that these factors do not represent a major risk for the semiconductor industry, as, despite the currently robust conditions, growth in China has actually decelerated compared to a few years ago. After expanding by 39.8 percent in 2004, China's semiconductor industry has settled into a more sustainable average growth rate ranging from 10 percent to 20 percent. This year will represent the cyclical peak for China's market, with growth expected to cool in the coming years, Wu said.
The communist republic has become an increasingly prominent player in the worldwide tech industry in recent years, as companies have become more open to explore business opportunities in China despite lingering legal worries. Last June, the China Semiconductor Industry Association accepted an invitation to apply for membership in the World Semiconductor Council, a group that had until then included only semiconductor organizations in Europe, Japan, Korea, Taiwan and the United States. Two weeks ago marked the first time that the WSTS committee meeting has been held in China.
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It is all about cost; cost per die, cost per wafer, cost, cost ,cost. The employees are over-worked and underpaid in China but U.S. companies (IDMs and OEMs) rake in higher profits which makes for happier investors. As long as the CEOs can deliver stock growth they are celebrated on Wall Street. Meanwhile the manufacturing engineers, etc. get displaced and wallow into service related jobs.
The most under-reported fact about all this is that if there is ever a world crisis where China is not our "Friend" we Americans will find microchips as hard to find as a $2 gallon of gas.
All About Cost - 2007-31-5 13:50:00 PDT -
As the world market finally realizes that a majority of products made in China are substandard or even dangerous, markets will dry up. Add to that the fact that manufacturing jobs in the US have gone to China and as a result the US economy is cooling, soon the market for goods from China will shrink. Not to mention that soon the workers in China will want the American dream of freedom and consumerism, the government will have to give concessions or face a building revolution
Man U Facturer - 2007-30-5 12:12:00 PDT
