China’s Impact on the Semiconductor Industry, High Tech, Page 89
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| Page content: When and as the recovery is realized, it is expected that China's electronic systems production will continue to grow at a greater rate than worldwide production. The transfer of electronic systems production to China is forecast to continue through the next business cycle, although probably at a slower rate. This will be driven by worldwide industry cost and market- driven restructuring, China's very competitive support infrastructure, China's longer term economic stimulus programs and China's growing domestic market demand. As a result, China's semiconductor consumption market will continue to grow somewhat faster than the worldwide market and should gain at least a couple of percentage points of market share over the next five years. An increasing share of this market will come from domestic consumption. If the relative share of domestic versus export consumption increases at merely the expected GDP growth rates of China versus the world, the share of China's semiconductor consumption market used in the production of electronic products for domestic use will increase by seven percentage points, to almost 40% in five years' time. This should further increase the importance of semiconductor companies developing products that meet the unique requirements of China's domestic market. This ranges from white-label handsets to transportation and medical infrastructure servers. It should also increase the government's efforts to encourage the development of China's IC design (fabless) industry sector and to reduce the use of foreign-owned intellectual property. We expect that the post-downturn recovery of China's semiconductor industry will be diverse, varying by sector as each reacts differently to market and economic forces. · IC design--During the next five years China's IC design (fabless) sector will be strongly driven by China's semiconductor consumption market and especially China's domestic consumption. Successful companies in this sector will continue to grow by exploiting a range of opportunities. These include: (a) China's white label handsets and other consumer electronic products; (b) cost reduced alternative products for volume electronic systems manufacturers; (c) unique Chinese standards and requirements for products such as smart cards and (d) designs for China's major OEMs. There will also be sector consolidation as well as continued government incentive support for new entrants and successful survivors. Therefore we expect this sector to continue to grow faster than the other sectors of China's semiconductor industry and faster than China's consumption market. · OSD--China's OSD sector has a much larger share of both the Chinese and the worldwide OSD markets and industry than any other sector has of the IC market and industry. Therefore its growth will be driven by the growth of both markets as well as by the continuation of the trend for multinational semiconductor companies to transfer OSD manufacture PricewaterhouseCoopers 89 | ||||||
