China Faces Large Gap In Semiconductor Production

In a report entitled, "China's Impact on Semiconductor Industry", consulting firm PricewaterhouseCoopers reports that China's semiconductor demand is outpacing its production. In 2003, the gap was $20 billion compared with $5.7 billion in 1999.

Interestingly, the demand for the semiconductors is coming from the export market. "In terms of chip demand, two thirds of the chips consumed in China are used for products that wind up being exported -- a proportion that isn't expected to change significantly in the near future," says Raman Chitkara, global head of PricewaterhouseCoopers.

Production of semiconductors has shifted to China in the past five years because China can produce them at a lower cost due to its deverticalized fabless/foundry model.

While the gap will remain for the next several years, concerns continue about protection of intellectual property, and this factor will weigh heavily as companies determine future locations of semiconductor fabrication plants.

For further analysis visit www.pwc.com/techcentre to download a copy of the report.

PricewaterhouseCoopers

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