Consumer electronics products boost China's IC industry

Enormous domestic demand will make it possible for China's IC market to maintain rapid growth during the next three to four years. The positive factors include the Beijing 2008 Olympic Games, the issue of second-generation ID cards, the establishment of 3G networks, the formation of new consumer electronics and automotive electronics markets, continuous inflow of foreign investment and the internationalization of China's local OEMs.

The emerging application market is a new growth point for China's IC industry. Though China's IC market continues to concentrate on three traditional fields, namely consumer electronics, computers and network communications, the industrial control, automotive electronics and flat panel display (FPD) segments are beginning to grow.

The China Automotive Industry Association forecast that in 2005 demand for automobiles would hit 5.5 million. In CCID Consulting's view, by 2008 China's automotive electronics market will proliferate with a compound annual growth rate (CAGR) of nearly 65%.

With constant upgrades, consumer electronics products boost China's IC industry. These include color TVs, DVD players, mobile phones, PDAs, digital cameras and MP3 players. With the wide application of analog-to-digital conversion technology, digital televisions and set-top boxes will become hot products in China next year. The State Administration of Film and Television, P.R.C., pro-jects digital TV subscribers will grow to 300 million by the end of this year, compared with 100 million subscribers in 2004.

Portable media players and 3G mobile phones should begin selling in volume by 2007. In 2008, IPTV and in-car entertainment systems will gain popularity among consumers in China. As a result, the demand for embedded CPUs will grow from 30% to 40% and by 2008, demand for IC in the field of consumer electronics will exceed that of PCs for the first time, according to the China Research Center of Information Industry Development (CRCIID), under the Ministry of Information Industry (MII), P.R.C.

In addition, given the brisk sales of portable products in China, the power management IC market will experience double-digit growth in 2006 and 2007. By 2008, the market will be worth U.S. $5.2 billion, according to the CRCIID.

Original design manufacturers (ODMs) represented by Taiwanese enterprises and large international electronic manufacturing services (EMS) vendors account for a lion's share of electronic products made in mainland China. Among electronics vendors in China, 76% are enterprises with foreign investments, and they account for 90% of the total export delivery value of electronic products. Data from iSuppli Corp. shows that in 2004 total sales revenue for the Chinese EMS market reached U.S. $27 billion, and the figure for the ODM market exceeded U.S. $60 billion. In 2005, sales revenue of both markets should grow more than 50%. In 2008, sales revenue for the Chinese ODM market is projected to reach U.S. $108 billion while the EMS markets will grow to U.S. $45 billion.

Large quantities of low-price Chinese electronic products are being exported around the world. With its existing and potential market demand and low-cost manufacturing environment, China is catching the notice of numerous "gold miners." Due to the restrictions of the Wassenaar Arrangement and a severe lack of technology, China will still buy ICs offshore for a long time. Nevertheless, as homegrown IC design companies launch more products, it is expected European, American, Japanese and Korean IC vendors that are gaining huge profits in China will move, build more fabs or outsource more business to local foundries, a development the Chinese Government would surely welcome.

source :Yao Gang - November 10, 2005 Reed electronics,

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Consumer electronics products boost China's IC industry