China IC industry hits $13B

By Suzanne Deffree -- Electronic News, 3/23/2007

China’s IC industry saw positive developments in both production and sales in 2006, propelling one research firm to say that the industry has once again entered high-speed growth.

CCID Consulting Co. Ltd this week reported that for the first time in 2006 sales revenue of the China's IC industry exceeded 100 billion Yuan and added up to 100.61 billion Yuan ($13 billion), an increase of 43.3 percent over 2005. The Beijing-based firm further said that the number of ICs produced in the year reached 35.56 billion, an increase of 36.2 percent over 2005.

The increase in 2006 over 2005 in sales and throughput was much higher than the increase in 2005 over 2004, which was 28.8 percent and 19 percent, respectively, according to CCID Consulting data.

It is of note that it took nearly 10 years for China's IC industry to grow from a scale of 1 billion Yuan in the early 1990s to the breakthrough of 10 billion in 2000, while it took a mere six years to grow from 10 billion to 100 billion, the firm said, adding that the domestic IC industry made a good start for the "11th Five-Year Plan" and the year 2006 became a milestone in the history of the development of China's IC industry.

According to Li Ke, an analyst at CCID Consulting, “although the worldwide semiconductor market does not project a clear prospect in the next five years, it seems obvious that China's domestic IC market will continue to grow steadily and rapidly with the drive of continuous development of the macroeconomy and the IT industry.”

The analyst further said that China's IC industry will also be driven to maintain a high- speed growth momentum during this period. Between 2007 and 2011, the average compound growth rate of the sales revenue of China's IC industry is expected to reach 27.7 percent, CCID Consulting said, adding that in 2011 the sales revenue of China's IC industry will exceed 300 billion Yuan, reaching 341.544 billion Yuan ($44.16 billion), making the country one of the world's most important IC manufacturing bases.

Specifically, CCID Consulting noted the accelerated development of the packaging and testing industry in China, which served as the main momentum for the industry growth in 2006. Indeed, China's packaging and testing industry saw the annual growth rate for sales jump from 22.1 percent in 2005 to 44 percent in 2006.

CCID Consulting  also pointed out the recurring overall improvement of China's IC industry in 2006, particularly in foreign investment. Indeed, just this week, Applied Materials and ON Semiconductor,  both California-based companies, announced facilities in China. Intel is also expected to announce a $2.5 billion fab in China next week.

The firm believes that Western China will become the key choice of multi-national semiconductor companies, and that the IC industry in the West will make a large stride ahead with the momentum added by foreign investment.