China’s Semiconductor Industry

Domestic demand for semiconductors, especially integrated circuits (ICs), is growing rapidly in China, stimulated by the development of information technology and advanced telecommunication infrastructures throughout the country, and by growing demand for common consumer products. Although it is difficult to gauge the exact number of ICs being imported, various estimates of China’s semiconductor market (e.g., by Dataquest, the Japan Electronics Industries Association, and SEMI) indicate that the market size was about $5 to 7 billion in 1996 and $8 billion in 1997 [Lammers 1997, Koo 1997]. In 1999, chip sales in China totaled $8.6 billion, or about 5.9 percent of worldwide semiconductor revenues. Market researchers from Cahners In-Stat Group estimate that China’s chip purchases will increase at a 33 percent annual rate from 1999 to 2003, pushing the country’s semiconductor market to nearly $27 billion in the next three years, or 8.6 percent of the world market. It is expected that, by 2010, China will become the world’s second largest market for semiconductors, next to the U.S. [Semiconductor Business News, 24 February 2000].