After years of double-digit annual growth, China's semiconductor sales revenue
in 2008 is expected to rise by only 6.7 per cent to reach $81.7 billion, up from $76.6 billion in 2007, iSuppli Corp predicts.
However, China's fabless Integrated Circuit (IC)
industry is expected to perform better, expanding by 12.3 per cent to reach $3.5 billion in 2008, up from $3.1 billion in 2007.
“This growth in fabless IC revenue is being driven by domestic sales of wireless and consumer electronics products, rather than by exports,” said Vincent Gu, China research analyst at iSuppli.
“Moreover, the Summer Olympic events in Beijing and other Chinese cities this year encouraged the release of new mobile handsets supporting the 3G, Digital Terrestrial Multimedia Broadcast (DTMB) and China Mobile Multimedia Broadcasting (CMMB) standards, boosting sales of associated ICs.”
China’s domestic market situation improved in 2008 despite regulatory restrictions and an incomplete supply chain. Popular applications supporting new domestic standards will appear in 2009 as their industrial ecosystems mature. Although there is substantial economic uncertainty, continued revenue growth is anticipated in 2009.
Today, more than 550 fabless companies compete in China. Most of these firms are young and small. More than 88 per cent will generate less than $10 million in revenue during 2008 and are struggling to continue their growth.
There are four major success factors in China's IC fabless industry: market, manpower, money and timing. U.S. fabless IC companies have advantages in the areas of technology and innovation. This frequently makes them winners in emerging markets. In contrast, Taiwanese companies have effective cost controls and are highly integrated, helping them to succeed in mature markets.
The launch of an alternative stock market in Shenzhen, called the Chinese Growth Enterprise Market (GEM), had been expected to prompt a flood of fabless IC Initial Public Offerings (IPOs) in 2008. However, the GEM was not introduced this year because of the current global financial crisis.
Moreover, venture capitalists generally lack interest in China's IC
industry. A majority of semiconductor firms are short of capital and face cash flow problems.
“iSuppli expects more than 100 Chinese IC companies to disappear within the next two years,” Gu warned. “Many companies presently are seeking buyers and a total of four companies already have been acquired by foreign semiconductor firms during the past 12 months. China's fabless IC industry is polarized with about 50 companies achieving success and the remainder struggling to survive. Some companies are losing money and have no mature products available to deliver the revenues needed to continue doing business. Most companies have announced layoffs, cut production lines or have shut down entirely.”
Om the other hand, there are expected to be several Chinese fabless firms that will be seeking IPOs on the NASDAQ and domestic stock exchanges during 2009. iSuppli expects that at least five companies will seek IPOs and at least 10 companies will be involved in mergers next year.
For more information, visit www.isuppli.com