News and New Products

China chip market to grow 15% in 2007, 12% in 2008

By Suzanne Deffree, Managing Editor, News -- Electronic News, 12/12/2007

Following a strong Q3, China’s semiconductor market is expected to hit 15% revenue growth this year, rising to $52 billion from $45 billion in 2006, according to iSuppli Corp.

If the estimates are met, 2007 will mark the first time that the nation’s semiconductor revenue exceeds $50 billion for a year.

“Strong midseason market demand during the third quarter helped semiconductor suppliers reach their sales revenue targets,” said Horse Liu, iSuppli senior analyst, China research, in a statement. “Meanwhile, exports of electronics products also grew significantly despite the negative effects of a higher Yuan and rising petroleum prices.”

According to the firm, industrial control systems -- such as inverter motor controls, security and surveillance systems, and automotive electronics -- all generated substantial growth in China so far this year, allowing leading semiconductor suppliers to benefit because of their broad product portfolio coverage and promotional activities during the past several years. For these same reasons, iSuppli said it was difficult for new entrants to penetrate emerging product categories.

The communication equipment markets also reported robust unit shipment increases. ISuppli noted that shipments of domestically designed mobile phones are forecasted to reach 204 million units in 2007, up 58 percent from 2006.

Meanwhile, electronics manufacturing services (EMS) providers and original design manufacturers (ODM) continued to drive shipment growth through electronic equipment orders outsourced to China.

ISuppli further reported that shipments of mainstream consumer-electronics products recorded stable unit growth during the first three quarters of 2007, compared to the same period in 2006. Annual growth in unit shipments of digital set-top boxes and digital still cameras in 2007 will exceed 30 percent, while LCD-TV shipments will double in 2007, the firm projected.

However, not all of the news is good. China’s semiconductor market, like most markets across the globe, saw suppliers face dramatic declines in chip prices due to heightened competition. As such, iSuppli said many vendors are having difficulty boosting their sales revenue.

2008 forecast

Next year will not be without challenges for suppliers, either, iSuppli said, noting that the Chinese government plans to optimize the nation’s economic structure and generate higher financial returns while pursuing measures intended to reduce overall resource consumption and to better protect the environment. The domestic electronics industry as a whole also needs improvement, the firm said.

On that, iSuppli forecasts that China’s semiconductor market will expand by 12 percent in 2008, with revenue rising to $58 billion for the year.

The firm noted that China’s currency will continue its gradual rise in value during 2008, while, at the same time, semiconductor suppliers will encounter more intense price-based competition.

Adding yet another challenge, iSuppli reminded that chip makers will lack new killer applications to drive a major phase of revenue expansion next year.  To compensate, chip makers are accelerating new product development efforts.
 
Domestic electronic product manufacturers also face similar problems, the firm said, noting that suppliers are strengthening partnerships with major customers as well as cultivating extensive distributor and design partner networks capable of supporting medium and small equipment manufacturers to counter this.