China IC market to boom through 2017, says IC Insights

Jessie Shen, DIGITIMES, Taipei [Thursday 31 January 2013]

The IC market in China is forecast to have a 2012-2017 compound annual growth rate (CAGR) of 13%, 5pp higher than the 8% CAGR forecast for the total IC market during the same period, according to IC Insights. Sales in China's IC market are expected to top US$100 billion for the first time in 2014, and climb further to approach US$150 billion in 2017, said the research firm.

China is set to represent 38% of the worldwide IC market in 2017, compared to 31% registered in 2012 and 23% in 2007, IC Insights said.

While the IC market in China generated US$81 million in 2012, only 11.2% of ICs sold in the region were made domestically, IC Insights observed. The share will rise only slightly to 13.1% in 2017, IC Insights said.

"A very clear distinction should be made between the IC market in China and indigenous IC production in China," IC Insights noted. "Although China has been the largest consuming country for ICs since 2005, it does not necessarily mean that large increases in IC production within China will immediately, or ever, follow."

China's IC output value is projected to rise at a 16.5% CAGR to US$19.5 billion in 2017 from only about US$9.1 billion in 2012, IC Insights said. Despite the strong growth, China will represent only 5% of the total forecast worldwide IC market of US$389.3 billion in 2017.

In 2012, SK Hynix, Intel and TSMC were the only foreign IC manufacturers that had significant IC production in China. Hynix's China fab had the most capacity of any of its fabs in 2012, while Intel continued to ramp up its 12-inch fab in Dalian, which will give a noticeable boost to China's IC output value over the next few years, IC Insights believes.

Intel's chip plant in China started production in late October 2010. Installed capacity at the 12-inch facility has reached 30,000 wafers a month, and it is capable of producing 52,000 wafers monthly.

In addition, Samsung Electronics reportedly has gained approval from the South Korea government to operate a 12-inch NAND flash fab in Xian, China. Samsung in September 2012 held a groundbreaking ceremony for the Xian fab, which is scheduled to produce the first batch of products in the first half of 2014.

"Historically, the lack of consistent intellectual property protection has been a major deterrent for foreign firms seeking to establish state-of-the-art IC fabrication facilities in China," IC Insights stated. "In fact, Samsung's 300mm NAND flash memory fab in China in 2014 will be the first IC production fab in the country to incorporate state-of-the-art IC technology."

IC Insights believes that China will continue to rely heavily on foreign IC suppliers. At least 70% of China's IC output value will come from foreign companies like Hynix, Intel, Samsung and TSMC in 2017.