Sales of semiconductor chips designed in China are surging at a double-digit clip helping to offset slower growth in the country's previously red-hot IC market as OEMs focus on customizing products for the local market, according to iSuppli Corp.
Led by demand from the wireless communications equipment sector, China's consumption of semiconductors designed in the country is forecast to rise more than 60 percent by 2012 to $42.1 billion from $25.8 billion in 2007 while the entire IC market for the country will grow at a slower 7.7 percent rate, the research firm said.
"The rise of the semiconductor design business in China shows that the nation's high-tech future increasingly will reside in capitalizing on local brainpower to produce innovative products that appeal to the domestic audience," said Kevin Wang, iSuppli's senior manager for China research in a report.
That's the good news from the local Chinese IC designers' perspective. Of concern to the global semiconductor industry is China's slowing consumption of semiconductors as foreign OEMs tamp back on outsourcing of electronic manufacturing to the region.
iSuppli estimates total sales of semiconductors in China will rise 7 percent in 2008 to $81 billion, up from $75 billion in 2005 but below the almost 28 percent compounded annual growth rate the country had recorded between 2001 and 2006.
iSuppli sees total semiconductor consumption in China growing at a steady 8 percent clip on a compounded annual growth rate basis between 2007 and 2012 as the government implements measures to keep the economy from overheating and as the national currency strengthens against the U.S. dollar.
"Furthermore, operating and labor costs are still rising along with prices for food, gasoline and electricity," iSuppli said in the statement. "Higher inflation, a weakened equity market and the devastating earthquake in Sichuan province negatively affected domestic market demand for electronic equipment in the first half of 2008."
China's independent design houses are not just serving the local market, however. In addition to designing products for Chinese consumption the IDHs are also looking to expand overseas and are exploring opportunities at international clients, iSuppli said.
In the meantime, the local IC designers are rapidly expanding beyond the wireless communications sector where they first made their marks into consumer electronics and white-good appliances. They are also moving into information entertainment products and security systems, the research firm said.