China’s Chip Market To Grow 15 Percent

China's semiconductor market will likely reach a 15 percent increase in revenue this year, jumping to $52 billion from $45 billion in 2006, according to a report by industry analyst iSuppli. This will mark the first time China's semiconductor revenue has surpassed the $50 billion mark. Industrial control systems — like inverter motor controls, security and surveillance systems, and automotive electronics — contributed to revenue growth. Leading suppliers with broad portfolios maintained dominance and benefitted from these product sales, while new entrants found it difficult to penetrate emerging product categories. Communication equipment markets also saw robust unit shipment increases, with domestic mobile phone shipments forecasted to reach 204 million units this year — up 58 percent from 2006. Consumer Electronics products recorded stable unit growth, with shipments of set-top boxes and digital cameras exceeding 30 percent growth and LCD-TV shipments doubling over the previous year. Some semiconductor suppliers, however, suffered from dramatic declines in chip prices due to heightened competition. Many vendors are having difficulty boosting their sales revenue, iSuppli said. 2008 Forecast Looking ahead to 2008, suppliers are encountering new challenges in maintaining growth. For example, the Chinese government plans to optimize the nation’s economic structure and generate higher financial returns while pursuing measures to reduce overall resource consumption and to better protect the environment, iSuppli said. Because of this, China’s semiconductor market will not expand as much in 2008 as it did this year. iSuppli predicts a 12 percent revenue boost to $58 billion for the year. As the value of China’s currency will continue to rise, semiconductor suppliers will encounter more intense price-based competition, iSuppli said. Chip makers will also suffer from a lack of new applications capable of driving a major phase of revenue expansion. To compensate, chip makers there are accelerating new product development efforts, iSuppli says. Domestic electronic product manufacturers also face similar problems, the firm said, and have responded by strengthening partnerships with major customers and cultivating distributor and design partner networks that can support medium and small equipment manufacturers.