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China's IC market meets targets due to strong Q3 growth

Posted: 17 Dec 2007     Print Version  Bookmark and Share

Keywords:China chip market  semiconductor market forecast  LCD TV 

In light of strong growth in Q3, China's semiconductor market will be on track to meet iSuppli Corp.'s revenue forecast of Rs.205,191.84 crore ($52 billion) this year, up 15 per cent from Rs.177,569.87 crore ($45 billion) in 2006.

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

Growth drivers
Industrial control systems such as inverter motor controls, security and surveillance systems and automotive electronics all generated substantial growth in China. Leading semiconductor suppliers benefited from growth in these segments because of their broad product portfolio coverage and promotional activities during the past several years, said iSuppli. For these same reasons, it was difficult for new entrants to penetrate emerging product categories.

Moreover, communication equipment markets reported robust unit shipment increases. For example, shipments of domestic mobile phones will hit 20.4 crore units, up 58 per cent from 2006. EMS providers and ODMs continued to drive shipment growth through electronic equipment orders outsourced to China. Major semiconductor suppliers also have experienced fast-paced growth in both revenue and unit shipments this year.

Shipments of mainstream consumer electronics products recorded stable unit growth during the first three quarters compared to the same period last year. Annual growth in unit shipments of digital STBs and digital still cameras will exceed 30 per cent. Beyond that, LCD TV shipments will also double, said iSuppli.

However, semiconductor suppliers suffered from dramatic declines in chip prices due to heightened competition. Many vendors are having difficulty boosting their sales revenue.

Looking ahead
For 2008, suppliers will encounter new challenges in maintaining growth. One challenge is that the China government plans to optimise its domestic economic structure and generate higher financial returns while pursuing measures to reduce overall resource consumption and to better protect the environment. The domestic electronics industry as a whole also needs improvement, noted the analyst firm.

According to iSuppli, China's semiconductor market will grow by 12 per cent in 2008, with revenue rising to Rs.228,867.83 crore ($58 billion). China's currency will continue its gradual rise in value during the next year. Likewise, semiconductor suppliers will encounter more intense price-based competition. Chipmakers will also suffer from a lack of new killer applications that will drive a major phase of revenue expansion.

To compensate, chipmakers are accelerating product development efforts. Domestic electronic product manufacturers also face similar problems. In response, 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. Improved service is becoming another important competitive differentiator within China's electronics market, concluded iSuppli.

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