China: Emerging Market For Foundries

by Ketaki Sood, Larta Research Economist

Coming soon from Larta Research : Semiconductor Industry

While Taiwan has been the leader in semiconductor contract manufacturing with the likes of Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and United Microelectronics Corp. (UMC) producing chips for international chipmakers, China is expected to be the next powerhouse in chip production. In Shanghai alone, plans of establishing at least a dozen plants by 2005 have been announced. These plants will be capable of making a half-million wafers a month. Plans of establishing plants in Beijing, Shenzhen, and Leshan are also underway. China is a big consumer of chips as domestic sales of computers, DVD players, and other products supported by chips continue to grow at a rapid pace.

Being an exporter of a variety of products, including electronic goods and computer peripherals, has also led to a surge in the Chinese chip market. Analysts predict that China's chip market will grow by 25% annually for the next 4 years, which is double the worldwide rate of chip growth. China's chip output this year has already reached $3.5 billion and boasts 10 major chip manufacturers and about 100 design houses. Domestic semiconductor production satisfies about 20% of local demand. Since the rest of the nation's needs are being supported via imports, China has potential to grow even further in chip manufacturing.