Semiconductor demand forecast trimmed as China’s electronic growth slows

21st February 2013

China’s slowing electronic industry growth is leading to reduced demand for semiconductors, prompting iSuppli Corp to trim its revenue forecast for chips sold in China in 2006.
iSuppli now expects China’s semiconductor revenue in 2006 to rise in a range from 11percent to 15percent. Such growth would put China’s semiconductor market at a size varying from US$41billion to US$43billion at the end of the year. This is down from iSuppli’s year-ago forecast of 18percent growth in 2006.
China’s semiconductor market amounted to US$37billion in 2005, up 13percent from 2004. These figures do not reflect all chip purchasing for production of electronic equipment in China, but rather all semiconductor buys that were actually billed in China. Due to China’s complex supply chain, many electronic systems made use chips that were actually purchased in other regions.
“The reduction in iSuppli’s semiconductor forecast reflects a general slowdown for Chinese electronics system production,” said Byron Wu, director, china research for iSuppli. “Although China’s electronics market continues to grow, several key issues such as
over-heated investment, increased operational costs and reduced corporate earnings threaten to stall the expansion.
“For the country’s semiconductor sector, what started as a breakout year is closing on a note of caution, following disappointing sales in the third quarter. Much is riding on the upcoming holiday season, which will drive semiconductor purchasing activity in the fourth quarter,” Wu added.
One of the areas of weakness for China’s semiconductor industry is in the telecom market. Most of the communications-orientated semiconductor suppliers serving this area suffered revenue declines of 20percent in the third quarter compared with the second quarter. Another factor has been the implementation of the Reduction of Hazardous Substances (ROHS) restrictions, which has slowed the growth of China’s electronics exports in the third quarter-and not only in telecom gear. Other segments seeing export declines due to ROHS include mobile phones, white goods, TVs and DVD players.
While Chinese telecom gear revenue began bouncing back late in the third quarter, it is clear that this recovery is being generated by the outsourcing and subcontracting activities of foreign firms, rather than by the domestic manufacturers. Demand growth for the Chinese-made gear is not very strong presently, iSuppli believes.
For consumer electronics, the third quarter was robust due to seasonal exports. Because of the seasonal peak
in the third quarter, iSuppli does not
expect to see much growth in
consumer-electronics export revenue in the fourth quarter. However, some areas will see increases in exports during the last three months of the year, including liquid crystal display (LCD) TVs, mobile phones, MP3 players and portable media players (PMPs).
The semiconductor industry enjoyed strong growth in revenue in the first half of the year due to major increases in demand. This is mainly because of leading multinational OEMs and contract manufacturers expanding their production in China of products including mobile phones, MP3 players, digital still cameras and video game consoles. Furthermore, chip sales were boosted by Chinese companies’ efforts
to export as many products as possible before the implementation of ROHS
last July. u

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