China's chip market grows 15% in 2007

For the first time, China's semiconductor revenue will surpass $50 billion

Propelled by a strong third quarter, China's semiconductor market is on track to show a 15% revenue increase this year.

China's semiconductor revenue is expected to hit $52 billion in 2007, up from $45 billion in 2006, according to market research firm iSuppli Corp. Horse Liu, senior analyst in China Research for iSuppli said in a report that this year marks the first time that the country has exceeded $50 billion.

"Strong midseason market demand during the third quarter helped semiconductor suppliers reach their sales revenue targets," Liu said in the report. "Meanwhile, exports of electronics products also grew significantly despite the negative effects of a higher Yuan and rising petroleum prices."

The strong numbers, according to iSuppli, largely stemmed sales of chips for industrial control systems like motor controls, security and surveillance systems and automotive electronics. Analysts also said that communication equipment markets reported very strong unit shipment increases, noting that shipments of domestically-designed mobile phones are expected to reach 204 million units in 2007, up 58% from 2006.

While not showing any dramatic increases, shipments of mainstream consumer-electronics products recorded stable unit growth during the first three quarters of 2007 compared to the same period in 2006, iSuppli reported.

Analysts noted, however, a price war between U.S. chip giants Intel Corp. and Advanced Micro Devices Inc. is affecting the China market. Many vendors, iSuppli noted, are having difficulty boosting their sales revenue. The good news though is that the price war looks to be winding down. Earlier this month, iSuppli reported that since both companies have taken financial hits during the long-running price war, Intel and AMD have started shifting relying on chip features and performance rather than price in differentiating their products.

Market growth is expected to continue in China in the coming year but not at the same level as analysts at iSuppli predict that China's semiconductor market will expand by 12% to $58 billion in 2008.

Copyright © 2007 IDG Communications, Inc.

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