China consumes one-third of global semiconductors

SINGAPORE – Electronics manufacturers in the Chinese market consumed more than one-third of semiconductors produced globally for the first time ever, industry-focused advisor PricewaterhouseCoopers (PwC) said.

According to China’s Impact on the Semiconductor Industry: 2008 Update, a PwC annual review of the semiconductor industry in China, in 2007 the nation became the dominant consumer of semiconductors, with the total consumption estimated at US$88 billion in, driven largely by growth in electronics manufacturing.

China’s consumption of semiconductors grew by 23 per cent last year–the third consecutive year that China’s semiconductor consumption has exceeded all other global markets.

“Semiconductor consumption in the Chinese market is growing at a faster pace than what the industry anticipated, said Raman Chitkara, global semiconductor leader, PwC.

“However, growth in production of semiconductors in China is not keeping pace with consumption, resulting in a widening gap between consumption and production of semiconductors in that market. While the Chinese government is implementing initiatives in the hope of increasing local production, we predict that this disparity is likely to continue in the near future”, said Chitkara.

According to the report, growth in exports is the major driver of semiconductor consumption in China. About 69 percent of semiconductors consumed in China in 2007 were used in various electronics products manufactured for export, up from 64 per cent in 2005.

In China, the semiconductor industry remains widely scattered with no dominant players, despite the increasing number and size of Chinese semiconductor companies. However, this is likely to change as the Chinese semiconductor industry further matures within the next five years with the likely emergence of a dominant player in the market.

The study also indicated that buying decisions for semiconductors consumed by the electronics manufacturing industry in China are often made outside the country, with the majority of such purchasing taking place in Taiwan and Japan. PwC predicts that as the Chinese industry matures, this business practice will diminish. Such a change will disproportionately benefit the companies with greater local presence in China.

The study also noted that while many of the largest semiconductor suppliers to the Chinese market are multinational companies, 32 of the top 70 global suppliers have a below average market penetration in China, the fasted growing semiconductor market in the world.

“Over the near term, established multinational semiconductor companies may find an unparalleled market opportunity in China, but over the long term the widening gap between consumption and production of semiconductors represents a domestic industry void that will inevitably be filled. What many people are anxious to find out is whether the gap between consumption and production will be filled by the transfer and expansion of multinational companies or the emergence and growth of significant Chinese semiconductor companies,” Chitkara said.

Sherman Cheung, Hong Kong-based assurance partner of PwC, said that the exceedingly dire state of the global economy does not alter the findings of the report, but the relative impact of some of the findings may have an effect.

“As the worldwide consumer electronics market is increasingly impacted by the global economic downturn, there is no doubt China’s semiconductor market and industry will be affected,” Cheung said. “While China may not be as severely impacted as the rest of the world, China’s domestic demand growth will not be sufficient enough to offset the global downturn on the semiconductor market and industry.”

Related Download
Five Key Issues for DNS: The Next Network Management Challenge Sponsor: F5 Networks
Five Key Issues for DNS: The Next Network Management Challenge
Download this whitepaper to learn the five issues that IT needs to think about around DNS and why, as well as how you can build a strong DNS foundation to maximize use of resources, secure DNS, and increase service management, while remaining agile.
Register Now