China’s Chip Market Rebounds to Robust Growth in 2010

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

China’s semiconductor market will decrease to $68.2 billion in 2009, down 6.8 percent from 2008. While this is a significant decline for Chinese semiconductor market that has consistently generated strong growth over the past years, it’s far less than the 16.5 percent expected for the global chip industry in 2009. iSuppli forecasts that China’s semiconductor market will grow by 17.8 percent in 2010.

Because of the Chinese government’s economic stimulus package, the country’s domestic electronics market rebounded starting in the first quarter of 2009. Thanks to China’s Home Appliance Products to Rural Area program, the domestic LCD-TV market will expand dramatically this year. iSuppli expects that China’s domestic LCD TV market will expand to more than 24 million units in 2009, up 80 percent from 2008.

The market for white-good appliances also will greatly benefit from the governmental subsidy policy. Chinese 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.

China’s government also is actively stimulating the domestic automotive market. In addition to subsidies, the government is reducing the consumption tax for purchasing a car with an engine smaller than 1.6 liters. iSuppli expects that China’s automobile market will expand to 12 million units in 2009, up 33 percent from 2008. The increase in car sales also stimulated China’s automobile electronics market. In 2009, China’s automotive electronics revenue and associated semiconductor consumption will be $14.1 billion and $2 billion respectively.

China’s three telecommunications operators—China Mobile, China Telecom and China Unicom—collectively will invest $22 billion to construct 3G networks in China this year. More than 200,000 3G base stations will be deployed in 2009, five times more than in 2008. By the end of June, China Telecom’s CDMA2000 EV-DO 3G networks will cover all the 342 cities in China. China Mobile and China Unicom will build up their 3G networks in 200 cities and 285 cities respectively in 2009.

Although global handset sales will decline by 10 percent this year, China’s domestic handset market will continue to grow in 2009. iSuppli predicts that domestic handset sales will amount to 240 million units in 2009, up 8 percent from 2008.

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. Meanwhile, the 3G handset market will rise to more than 25 million units. Smart phones will be a popular product in 2010.

With the recovery of the global economy, China’s electronics and semiconductor markets will have a double-digit increase in 2010, driven by the growing export market. According to iSupplis China Application Market Forecast Tool (AMFT), China’s semiconductor market will expand to $80 billion in 2010, rising at a 17.8 percent annual growth rate. Besides 3G smart phones, netbooks, Blu-ray DVD players, LCD TVs, energy meters, surveillance and medical electronics will be the most popular electronic products in 2010.