Global Semicondutor Revenue Up 5.7%, as China-Taiwan Competition Heats Up

Global semiconductor revenues increased 5.7% in 2005. Taiwan remains dominant manufacturer, but experts agree that China will be a threat in 5-10 years.

Edited from and The Associated Press

Global semiconductor revenue increased 5.7% in 2005 to $235 billion, according to final results by Gartner, Inc.  Last year’s chip revenue surpassed the semiconductor industry's previous record of $223 billion set in 2000.

High PC demand helped Intel retain its position as the No. 1 semiconductor supplier in 2005. Intel's revenue grew 12.6%, twice the market average.

Commodity memory demand bolstered the fortunes of Samsung Electronics, who now dominates most areas of the memory market, and Hynix Semiconductor, who moved into the top 10 for the first time in 2005.

Samsung held the No. 1 position in DRAM, SRAM and the fast-growing NAND flash market in 2005. Hynix's NAND flash revenue reached $1.5 billion, up from $212 million in 2004, an increase of more than 600%. Overall, Hynix grew 23%, the fastest growth among the top 10 semiconductor suppliers.

Leaders of Taiwan's chip industry are confident they'll stay dominant in the US$227 billion (euro181 billion) world semiconductor market. But according to Darryl Cheng of Yuanta Core Pacific Securities in Taipei, ''Taiwan's chip advantage over mainland China can only be maintained for the next 5 or 10 years. After that it will be increasingly hard to keep it up.''

Hong Kong-based analyst Warren Lau of investment bank Macquarie agrees, noting that by the end of 2005 China accounted for more than 20 percent of global chip consumption, making it the largest chip buyer in the world.

The growing mainland market will force more foreign companies to invest in China to take advantage of its burgeoning chip demand, Cheng said.

The issue of Chinese inroads is a major worry for many Taiwanese. The two sides split amid civil war in 1949, and tension between the two remains palpable, underscored by Beijing's threats to attack if Taipei moves to formalize its de facto independence.

China's growing abilities also are a major concern of Taiwan's government, the Democratic Progressive Party (DPP), which has imposed restrictions on technology transfers to China.

Still, with a 50 percent market share, Taiwan Semiconductor Manufacturing Co. dwarfs the 6.6 percent registered by China's Semiconductor Manufacturing International Corp., the mainland's largest chip foundry, analysts say.

The Taiwan Semiconductor Association says that in 2005 Taiwanese chip companies had revenues of US$35 billion (euro28 billion), more than seven times the mainland's total.

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