Chinese chip market surpasses $50 billion

The amount of semiconductors purchased in China in 2008 will rise 12% to $58 billion after growing 15% in 2007, according to researcher iSuppli.

China's semiconductor revenue increased to $52 billion in 2007, up from $45 billion in 2006 and was the first time that the nation's semiconductor purchases exceeded $50 billion for a year.

Semiconductor growth in China is growing because of strong demand from industrial control, security and surveillance systems, automotive and communications equipment manufacturers. Leading semiconductor suppliers benefited from growth in these segments because of their broad product portfolio coverage.

Shipments of domestically-designed mobile phones reached 204 million units in 2007, up 58% from 2006. Similar growth is expected in 2008.

Electronics manufacturing services (EMS) providers and original design manufacturers (ODMs) continued to drive shipment growth through electronic equipment orders outsourced to China.

Shipments of consumer electronics products recorded stable unit growth during the first three quarters of 2007 compared to the same period in 2006. Annual growth in unit shipments of digital set-top boxes, and digital still cameras in 2007 exceeded 30%. Despite that strong demand semiconductor suppliers saw dramatic declines in chip prices due to heightened competition.

In 2008, buyers in China can expect more price competition among suppliers because of a lack of any new killer applications. Buyers can expect chip makers to boost new product development efforts and try to strengthen and build partnerships with OEMs and EMS customers.