The increased demand for chips by electronic manufacturers in China was the single biggest contributing factor to the 90 percent growth in the worldwide semiconductor market for 2005, a continuation of a trend first noticed in 2003, according to analysis released Wednesday by PricewaterhouseCoopers.
For the first time, the Chinese chip market was bigger than that of Japan, the Americas, Europe, and the rest of the world in 2005, the most recent year for which data are available.
According to the report, by 2010, almost one-third of the global market for semiconductors could be in China. Currently, a large portion of this demand is driven by Chinese original equipment manufacturers (OEMs) who are manufacturing electronic products.
The report estimates that 26 percent of Chinese demand in 2005 was from domestic OEMs compared to 20 percent in 2004.
The growth of electronic systems built in China for export accounted for a major part of semiconductors consumed in China as almost two thirds of the semiconductors consumed in 2005 were for products exported out of the country, up from 60 percent in 2004.
Still, even though there is a substantial demand for chips in China, the country continues to rely on multinational companies for semiconductors, the report said.
For 2005, there were no Chinese-branded companies ranked in the top 70 chip suppliers to China. Of the top 10 suppliers to China, in 2005, sales were more than $1 billion. Yet, the top Chinese semiconductor company in 2005 had less than $200 million in sales, the report noted.
Semiconductor companies could do more to gain a better share of the Chinese market. This can be done by semiconductor suppliers increasing their local presence and business development plans to achieve long term growth in China, the report suggested.
The PricewaterhouseCoopers report "China's Impact on the Semiconductor Industry: 2006 Update" was compiled from Chinese and other published statistics on the subject.