The background of china IC market
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China's
semiconductor market has grown from a meager $2 billion
during the 90's to become the third largest consumer of
semiconductors worldwide, with revenues exceeding $26
billion in 2004. China will continue to grow at twice
the pace of the entire semiconductor industry over the
next five years, hence foreign suppliers must continue
to invest and participate in this market to capitalize
on the opportunities. |
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Suppliers
should develop contingency plans and make China part of
their global strategy as both a growing opportunity and
competitive threat. This is because China is gradually
moving into its next stage of maturity as it reaches parity
with the other leading nations in the semiconductor market. |
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Despite
a positive direction toward trade reform in China after
the country's entry into the World Trade Organization
(WTO) in 2002, China's government policy and agenda continues
to have such a strong influence in investments instead
of fundamental market dynamics. This assertive position
by the government will continue to have a positive and
negative influence on the market. The current policy has
encouraged over $9.3 billion of capital investments in
the semiconductor industry since the year 2000, and another
$4.5 billion of investments is expected this year. Given
this strong push and commitment, smaller suppliers have
gained traction in the global foundry market. Last year
the Chinese suppliers grew from 7% in 2003 to represent
over 12% of the worldwide dedicated foundry industry,
where SMIC alone had over 6% share. |
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As
the restrictions to foreign investment get removed gradually,
the competition will force consolidation of the industry
in China, and only the ones with a technology leadership
or niche, and a strong management that is focused on customers,
execution, and profitability will survive. |
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