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Electronics Production | May 30, 2007

China's Chip Market to Rise 20 Percent in 2007

Despite uncertainties regarding the technology sector and the overall economy, China's semiconductor market growth is expected to accelerate in 2007, according to Byron Wu, director and principal analyst, China Research, for iSuppli Corp.
Speaking at the World Semiconductor Trade Statistics (WSTS) Spring 2007 Committee Meeting in Shanghai two weeks ago, Wu predicted semiconductor shipments in China would rise to $51.7 billion in 2007, up 20 percent from $43 billion in 2006. This compares to 15 percent revenue growth in 2006.

While such accelerated growth may seem to be positive, there are some concerns that the Chinese technology industry and the overall economy are entering a stage of unsustainable hyper-expansion that could generate a market bubble.

“The major theme for China in 2007 is overheating," Wu said. “There's concern over whether Chinese electronics OEMs will continue expanding their sales, whether buying power will continue to increase among consumers and whether exports will remain on the rise. At the macro level, there's increasing concern that the overheating economy could bring a disastrous bubble that could derail China's stock and real estate markets."

However, Wu said these factors do not represent a major risk for the semiconductor industry, where growth has actually decelerated compared to a few years ago. After expanding by 39.8 percent in 2004, China's semiconductor industry has settled into a more sustainable average
growth rate ranging from 10 to 20 percent. This year will represent the cyclical peak for China's market, with growth expected to cool in the coming years.

The attached figure presents iSuppli's forecast of China's semiconductor market shipments.

Hot segments of China's electronics market include flat-panel televisions, which are replacing CRT sets at an accelerated rate in the nation and elsewhere. In China, the output of flat-panel televisions
will surpass CRT TVs by 2010, Wu predicted.

Other lucrative areas include digital set-top boxes, 3G mobile phones and so-called Digital Multimedia Platforms (DMPs). DMPs are converged personal multimedia products that combine functionality found in varying products including Personal Media Players (PMPs) and mobile televisions, PMPs and global positioning systems and Digital Still Cameras (DSCs) and digital camcorders.

Two weeks ago marked the first time that the WSTS committee meeting has been held in China. Wu was invited as the only guest speaker to give presentations for the Committee meeting on China's quickly developing electronics and semiconductor markets.

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