China’s Impact on the Semiconductor Industry, High Tech, Page 79
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| Page content: maximum for each type of appliance plus paying for the transportation expense of collecting the used appliance. There is some question about how effective this program will be as there is already a market for consumers to sell their used appliances to traders that may offset the net value of any subsidy. Still, the government has allocated 2 billion RMB (US$290 million) for this program in 2009. If this subsidy is fully utilized in 2009, it could result in US$600 million in semiconductor consumption. On a longer term basis, the government's stimulus programs that cover railroad and air transportation, telecom networks, rural improvements and healthcare reform have the potential for an even greater impact on the recovery from the 2008/09 semiconductor downturn. These programs will need huge investments in advanced technology and should promote the use of semiconductor- enabled products such as computers, servers and mobile devices for the world's most populous nation. There appears to be an opportunity for major multinational semiconductor companies to team with appropriate government agencies in addressing these needs. The Chinese government's stimulus package will accelerate the use of computers and other emerging technology devices in the country and will help increase the market's recovery. Currency exchange rates Prior to 2005, China had maintained the value of its RMB at a relative fixed exchange rate to the US dollar of RMB 8.28 = US$1.00. From the third quarter of 2005 China has allowed the value of its RMB currency to gradually increase to the point that, by the fourth quarter of 2008, the quarter average exchange rate was RMB 6.84 = US$1.00 and the annual average rate for 2008 was RMB 6.9498 = US$1.00. This three and a half year gradual increase in the RMB/US$ exchange rate has had some impact on the semiconductor industry, especially for those companies with operations in China. The magnitude of that impact varies depending upon each company's business model. Since July 2005, companies with sales transacted in US$ have seen the RMB value of their sales revenue decrease by 16%, while companies with costs incurred in RMB have seen the US$ value of those expenses increase by 19%. Most multinational companies operating in China and local companies serving international markets earn most of their revenues in US$ or equivalent currencies while incurring some to most costs in RMB. Companies in the IC manufacturing sector, that is foundries and IDM wafer fabs, earn almost all revenue in US$. But meanwhile, they also have a relatively higher percentage PricewaterhouseCoopers 79 | ||||||
