Chinese Manufacturing Accounts For 90% Of Semiconductor Market

Growing domestic demand increases Chinese market

Electronic systems manufactured in China were the driving factor behind 90% of the growth in worldwide semiconductor consumption in 2005, continuing a trend first observed beginning in 2003, according to an analysis by PricewaterhouseCoopers (PWC).

In its report entitled, "China's Impact on the Semiconductor Industry: 2006 Update," PWC found that for the first time, the China market alone was larger than that of Japan, the Americas, Europe and the rest of the world in 2005.

A substantial percentage of this demand is the result of electronic goods produced by Chinese original equipment manufacturers (OEMs). The report estimates that 26% of Chinese demand in 2005 was from domestic OEMs compared with 20% in 2004. Looking ahead, PWC predicts that by 2010 fully one-third of the worldwide market for semiconductors could be in China.

Growth in electronic systems built in China for export accounted for a substantial portion of semiconductors consumed in China. Almost two thirds of the semiconductors consumed in 2005 were used in products exported out of the country, up from 60% in 2004.

The report found that Chinese companies are not able to supply the market alone. No Chinese-branded companies ranked in the top 70 chip suppliers to China in 2005. Each of the top multinational 10 suppliers to China exceeded $1 billion in sales in 2005. By contrast, the top Chinese semiconductor company in 2005 had less than $200 million in sales.

"Semiconductor companies need to sharpen their focus on China to fully leverage the vast potential offered by the Chinese market," explained Raman Chitkara, global managing partner of Semiconductor Industry Services at PricewaterhouseCoopers. "Enhanced local presence and business development efforts may be needed for semiconductor suppliers to achieve long term success in China."

To obtain a copy of the complimentary 72-page report, visit http://www.pwc.com/techcenter


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