Chipset exports drive massive growth for China fab market

The market analyst reports that operations by fabless semiconductor firms in China will generate $10.7billion in revenue in 2015, up from $5.2bn in 2010. This growth comes on top of a 32.6% expansion in 2010, with revenue rising from $4.2bn in 2009. IHS forecasts that revenue will reach $5.74bn in 2011, up 11.3% from 2010. In 2010, China's fabless companies benefited from the booming demand for semiconductors used in cell phones, with shipments of mobile handsets designed in China rising by almost 60% last year. However, Vincent Gu, analyst at IHS adds that despite China's growth prospects for the fabless business, the industry faces obstacles such as its difficulty in penetrating the market for logic semiconductors. "In the first half of 2010, both foundry and assembly capacity were in a state of short supply, and capacity was difficult to obtain given the small size of domestic fabless suppliers," said Gu. "The semiconductor industry also contends with an oligopolistic structure, with market share dominated by a small group of large competitors. The very small size of fabless Chinese fabless companies makes it that much harder for them to compete with the worldwide giants. "A bright spot for the fabless industry remains the increased support it enjoys from the government, which launched a new policy this year on software and integrated circuit industry. The new policy is more flexible, and the Chinese fabless industry appears set on a fast track to growth in the future."