CCID sees slowdown in China IC market growth rate

Sales revenue of the China IC market hit $79.15 billion in 2007, up 28.6 percent y-on-y, according to a CCID Consulting report.

However, while the market showed positive growth over the previous year, this growth rate represents the lowest in five years. Negative growth rates have been recorded in the last four consecutive years.

Along with the increase in market cardinal number, growth rates gradually decreased as downstream output of complete machines became saturated. The high growth rate previously exhibited by China’s IC market was driven by the increase in the downstream output of complete machines. After years of rapid development, downstream output China’s complete machines began to drop.

As for application, only the automotive electronics segment showed remarkable growth rates, but this segment is too small to influence the whole market, said CCID.

Growth drivers
Three major segments—computer, consumer and network communications—accounted for 88.1 percent of the China IC market.

Computer products accounted for the biggest market share. Although the output of printers has reduced, with the rapid development of notebooks, the China computer IC market developed rapidly, growing at a rate of over 20 percent.

In the network communications IC market, demand for mobile phones and similar devices pushed communications products to a growth rate of 19.2 percent. With a decrease in complete machines output, the growth rate of consumer IC market was 15.6 percent. Although the growth in the automotive electronics market entered a slowdown, the market grew by 38.2 percent.

As for product structure, memory accounted for the biggest market share. Although prices of memory products showed huge fluctuations, driven by NAND flash and DRAM, the situation had changed. The NAND flash market remained normal, but prices of DRAM products fell due to oversupply. CPU and embedded processors maintained higher growth rates. Affected by price reductions and waning demands, the growth rate of analog ICs slowed down.

Top players
The top four manufacturers in China’s IC market remain unchanged, said CCID.

Intel achieved the largest market share. Samsung and Hynix also performed well despite price reductions for DRAM products. Affected by price reductions in analog ICs, the growth rate of TI slowed down.

Meanwhile, Toshiba overtook AMD on the fifth spot due to better performance on the flash memory and consumer markets. AMD’s market share likewise shrank due to its intense competition with Intel.

With a better performance in the mobile phone platform, MTK has entered China’s top 10 enterprises. Meanwhile, Qimonda was out of China’s top 10 enterprises due to price reductions in DRAM.

Slowdown
According to CCID, the China IC market will hit $152 billion in 2011but it will be up for a slowdown over the next five years.

With a slowdown in production capacity and the decreasing output for complete products, the growth of China’s IC market will continue to decline. However, market growth will peak in 2008. Driving this growth are the upcoming 2008 Olympics as well as DTV and 3G applications. However, cardinal numbers for complete machine output and the IC market will remain high, suggesting a trend towards saturation, which will mark a slowdown in market growth rate.

Despite this slowdown in growth, China will remain an important force in the global market in the next five years. CCID forecast the CAGR of China’s IC market will reach 16.2 percent in the next five years.