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China's chip market to weaken in '09

Posted: 23 Jan 2009     Print Version  Bookmark and Share

Keywords:semiconductor industry  chip market  consumer confidence  semiconductor outlook 

According to iSuppli Corp., China's semiconductor industry has been an engine for growth in terms of consumption over the years but the sector is forecasted to contract in 2009.

In terms of consumption, China's chip market is expected to decline by 5.8 per cent to Rs.360,262.01 crore ($72 billion) in 2009, down from Rs.382,778.38 crore ($76.5 billion) in 2008, according to iSuppli. The only previous decline iSuppli recorded was in 2008, when revenue decreased by 0.1 per cent.

ISuppli predicts growth will return in 2010, with a revenue rebound of 9 per cent, followed by an 11 per cent increase in 2011.

2009 looks bad, however. ''Such a downturn is remarkable for an region long regarded as a vigorous and reliable growth driver for global semiconductor market,'' said Kevin Wang, an analyst with iSuppli, in a statement. ''With global semiconductor revenue expected to decline by 9.4 per cent in 2009, and with consumer confidence at risk of falling further, China's semiconductor outlook could dim even more than iSuppli presently forecasts.''

The main problem in China? ''China's economy has been increasingly affected by the financial crisis in developed countries since the third quarter of 2008,'' Wang said. ''Many small consumer electronics factories in Guangdong province closed because of lower sales orders and cash flow problems. Market conditions became even more negative in the fourth quarter of 2008. Most small firms saw their business decline by more than 40 per cent, especially at low-tech, labour-intensive and export-oriented companies.''

To boost the economy, the Chinese government cut interest rates four times within two months starting in October 2008. A stimulus package estimated at around Rs.2,852,074.23 crore ($570 billion) will be implemented during the next two years.

The central government is in the process of making major structural changes in its industrial and commercial sectors through new corporate income tax and labour laws, plus the updated No. 18 Document of the State Council. The No. 18 Document has focused on building up China's high-tech electronics industries since the year 2000, especially semiconductors and Information Technology (IT).

-Mark LaPedus
EE Times

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