China chip sales to rebound in 2010, says iSuppli

Following a decline in 2009, the China semiconductor market is expected to rebound vigorously in 2010 as exports of electronic products recover from the global economic crisis, according to iSuppli.

China's semiconductor market will decrease to US$68 billion in 2009, down 6.7% from US$72.9 billion in 2008, iSuppli estimated. While this is a significant decline for the China semiconductor market, which has consistently generated strong growth in past years, it is far less than the 16.5% drop expected for the global chip industry in 2009. Falling exports are the main culprit for the decline.

"Because of the China government's economic stimulus package, the country's domestic electronics market started rebounding in the first quarter of 2009," said Kevin Wang, director, China research for iSuppli. "This fueled a subsequent recovery in semiconductor demand that limited the decline in 2009 and set the stage for a return to double-digit percentage growth in 2010."

iSuppli forecasts that the China semiconductor market will grow by 17.8% in 2010 to reach US$80.1 billion.

Automotive electronics represents the only major application market that will generate an increase in semiconductor demand in 2009, with chip revenues rising 11% to US$2 billion, according to iSuppli. With the global automotive market in the dumps, China's domestic sales will drive the increase.

"The China government's efforts to stimulate domestic car demand has been very successful," Wang said. "In addition to subsidies, the government is reducing the consumption tax for purchasing a car with an engine smaller than 1.6 liters. Because of this, iSuppli expects that China's automobile market will expand to 12 million units in 2009, up 33% from 2008."

As the global car market recovers in 2010, China's automotive semiconductor growth is expected to accelerate to 19.7% reaching revenues of US$2.4 billion for the year, according to iSuppli.

The consumer electronics chip market in China will not fare so well in 2009, with revenues declining 11.6% to US$15.3 billion, iSuppli said. However, there are some bright spots in the nation's consumer electronics market. "Thanks to China's Home Appliance Products to Rural Area stimulus program, the domestic LCD TV market will expand dramatically this year," Wang said. "iSuppli expects China's domestic LCD TV market will expand to more than 24 million units in 2009, up 80% from 2008."

The market for white-good appliances will also greatly benefit from the governmental subsidy policy in 2009, iSuppli indicated. China-based white-goods makers, such as Hisense, Haier and Changhong, are garnering the largest subsidies because the price of their products for governmental bids is lower.

Conditions will shift dramatically in 2010 for China's consumer electronics segment as the global economy improves and exports recover, with revenues rising 16.3% to US$17.8 billion, iSuppli forecast.

China's wireless communications semiconductor market is set to slide 7.6% to US$16.3 billion in 2009, according to iSuppli. However, ongoing voice-service fee reductions and declines in average handset selling prices will assure stable growth for China's mobile subscribers during the next five years. iSuppli expects that China's domestic handset market will grow to 260 million units in 2010, with the 3G handset segment to exceed 25 million units. Smart phones are expected to be a popular product in 2010, the research firm added.

iSuppli forecast that China's wireless semiconductor market will expand to US$20.3 billion in 2010, up a robust 24.3% from 2009.