PEBBLE BEACH, Calif. " Contrary to popular belief, China's chip makers will remain a small factor in the worldwide IC market and will not affect the supply/demand picture in the near term, according to an analyst at the Industry Strategy Symposium (ISS) here Tuesday (Jan. 13).
Some analysts and executives, including Morris Chang, chairman of silicon foundry giant Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), believe that China will affect the supply/demand scenario in ICs and will cause another downturn in 2005.
Others disagree, predicting China's chip makers will remain a small fish in the big semiconductor pond. Still, China remains the world's fastest growing chip market in terms of overall demand.
In total, China's domestic chip production is growing at a compound annual growth rate of 20 to 30 percent a year, said Bill McClean, president of IC Insights Inc. But China is also coming from a small base. In 2003, the nation's IC vendors produced $1.2 billion worth of chips.
"That's still a small percentage of the overall IC market," McClean said. The semiconductor industry is expected to jump 27 percent this year, from $166.4 billion in 2003, to $210.5 billion in 2004, according to IC Insights.
By 2005, China's chip industry is projected to reach $4.18 billion, or only 2.5 percent of the total IC market, according to IC Insights. In comparison, the worldwide IC industry is supposed to hit $166.9 billion by 2005, according to the research firm.
By 2010, China's IC industry is expected to reach $15.35 billion, or 5.7 percent of the total IC market, the firm said. In comparison, the worldwide IC industry is supposed to hit $270 billion by 2005.
This is not to say that China's chip makers will be insignificant. In fact, China is projected to have two $1 billion chip makers by 2005 " both of which are silicon foundry providers. Indeed, China's foundry hopefuls are shaking up the landscape.
Semiconductor Manufacturing International Corp. (SMIC) is projected to grow from $350 million in terms of worldwide sales for 2003, to $1.325 billion in 2005, according to IC Insights. Grace Semiconductor Manufacturing Co. is projected to grow from $125 million in 2003 to $1.02 billion by 2005.
The next largest Chinese chip maker is Hua Hong NEC, which is expected to grow from $210 million in 2003, to $715 million by 2005.