Though the Chinese fabless semiconductor industry is poised for tremendous growth, it remains quite small compared with the rest of the world, Chu asserted during a panel session at the Asia America Multi-technology Association conference here Tuesday (Oct. 4).

Chu said total revenue for Chinese fabless companies in 2004 was less than $1 billion and that most of the companies' designs are 0.18 micron or 0.25 micron. By comparison, advanced fabless companies in the U.S. are working on 90- or 65-nm designs.

"It's important to remember when we talk about opportunity in China and design capability, we are really talking about 0.18 micron and not 90 nanometer," Chu said.

Chu said Conexant Systems Inc. ranked tenth in 2004 fabless revenue with $915 million, earning almost as much as the roughly $980 million that the entire Chinese fabless industry earned in 2004. Mediatek Inc., Taiwan's leading fabless company, earned over $1.1 billion, more than the entire Chinese fabless industry, Chu said.

China's top fabless company, Datang, earned $91 million in 2004.

Chinese companies are "growing very fast, but a lot of the products are still low end," Chu said.

Sam Wang, president of Semiconductor Manufacturing International Corp. (SMIC) Americas, said the foundry is seeing a growing percentage of revenue from Chinese fabless companies. While they contributed 5 percent of SMIC's total revenue in 2004, fabless revenue will likely double to roughly 10 percent this year. SMIC, he said, is also seeing an increase in 0.18 micron designs by Chinese companies.

Wang added that roughly half of the 200 tapeouts sent to SMIC for manufacturing come from Chinese companies. Hinting at a coming explosion in revenue, he said Chinese companies "have a lot of activities going on" but have yet to create fast-ramping, big-revenue products.

Ping Wu, president and CEO of Spreadtrum Communications Inc., stressed that IC production in China has not even eclipsed domestic demand. Though the trend is leveling off, he said, demand for semiconductors in China is projected to be more than four times the country's production by 2008.

While semiconductor manufacturing is growing in China, design activity is "nearly nonexistent," he added.

Rob Baxter, president and CEO of Centrality Communications Inc., a U.S. fabless company with healthy business in China, predicted design activities will grow quickly in China. "Clearly there is an insatiable appetite for learning" in China, he said.

Chu added that most Chinese fabless companies are small and underfunded, with no budget for EDA tools. This is a factor in the controversial issue of IP protection in China, he said, because companies without tool budgets may end up obtaining them illegally.

Baxter also expressed concerns about the maturity of SMIC's advanced processes. Baxter said SMIC's 0.13- micron process is not stable enough and, therefore, would end up costing the company more money than using its current foundry supplier, Taiwan Semiconductor Manufacturing Co. Ltd.