China consumed a third of all semiconductors produced globally: study

Singapore: Chinese manufacturers of electronics consumed over a third of semiconductors produced globally for the first time ever, according to a report by consulting firm PricewaterhouseCoopers (PwC). 

In its report ''China's Impact on the Semiconductor Industry: 2008 Update'', which is an annual review undertaken by PwC of the semiconductor industry in China, 2007 saw China become the dominant consumer of semiconductors. It notched up an estimated total consumption at $88 billion, mainly on account of growth in electronics manufacturing.

China's consumption of semiconductors grew 23 per cent in 2007, marking the third consecutive year that the country's consumption has exceeded all other global markets. ''Semiconductor consumption in the Chinese market is growing at a faster pace than what the industry anticipated, said Raman Chitkara, global semiconductor leader, PwC.

Chitkara  said that growth in production of semiconductors in China is not keeping pace with consumption, resulting in a widening gap between consumption and production of semiconductors in that market. He said that while the Chinese government is implementing initiatives in the hope of increasing local production, his firm predicts that the disparity is likely to continue in the near future. 

The report says that a growth in exports is the major driver of semiconductor consumption in China, with almost 69 per cent of semiconductors consumed in China in 2007 having been used in various electronics products manufactured for export. That number is up five per cent from 64 per cent in 2005.

The study says that most buying decisions for semiconductors consumed by China's electronics manufacturing industry are made outside the country, most of them being made in Taiwan and Japan. PwC has predicted that as the industry matures in China, this business practice would diminish to the disproportionate benefit of companies with a greater local presence in China.

While many of the largest semiconductor suppliers to the Chinese market are multinational companies, 32 of the top 70 global suppliers have a below average market penetration in China, the study says. PwC says that for the near term, the going would be good for established multinational semiconductor companies who would find an unparalleled market opportunity in China, but over the long term the widening gap between consumption and production of semiconductors would inevitably be filled, either by the transfer and expansion of multinational companies, or the emergence of significant Chinese companies.