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China Further Expands Its Influence in Semiconductor Industry

China Further Expands Its Influence in Semiconductor Industry
by Raman Chitkara on 11-05-2015 at 7:00 am

 For the fourth consecutive year, China’s semiconductor consumption growth far exceeded worldwide market growth. At the end of 2014, the country had a record 56.6% of the global semiconductor consumption market.

China’s semiconductor consumption grew by 12.6% in 2014, exceeding the worldwide chip market growth of 9.8%. To put that in a broader perspective, over the past 11 years China’s semiconductor consumption has grown at an 18.8% compounded annual growth rate (CAGR), compared with a 6.6% CAGR for total worldwide consumption.

At the end of 2014, China had three semiconductor companies with US$1 billion or more in annual revenue. Collectively, these companies have experienced an 18.5% CAGR over the past 11 years. In the future, we expect to see more Chinese semiconductor companies break the billion-dollar revenue mark either organically or through mergers.

Even with Chinese semiconductor companies growing in number and size, non-Chinese global semiconductor companies remain the dominant semiconductor suppliers to China. This contributed to China’s integrated circuit (IC) consumption/production gap of US$120 billion at the end of 2014—US$12 billion wider than at the end of 2013. The growing production/consumption gap and the strategic importance of the industry will continue to favorably influence the policies of the Chinese government as far as the semiconductor industry is concerned.

So what areas contributed to China’s chip consumption during 2014? We saw heavier concentrations in the data processing (computing) and communications applications sectors, and slightly more concentration in the consumer sector versus the worldwide market. Contrasting with the worldwide market, however, China’s semiconductor consumption was less concentrated in the automotive sector, and noticeably less concentrated in the industrial/medical/other, and military/aerospace sectors.

China’s IC consumption over the past decade has grown by more than US$134 billion, compared with just US$99 billion for the worldwide market. The country’s growth in this area has come at the expense of other regions’ IC markets, but we’re also seeing China’s rate of IC consumption market growth gradually moving closer to the worldwide rate. China’s IC consumption increased by more than US$20 billion in 2014, which was US$6 billion less than the worldwide market.

China’s O-S-D (optoelectronics-sensor-discrete) segment tells a similar story, with consumption growing 8.1% during 2o14 to reach a new peak of US$34.3 billion. Sensors are fundamental to the Internet of Things (IoT), and will help drive an increase in semiconductor industry billings. But for the first time in four years, China’s O-S-D increase was slightly less than the worldwide market increase, meaning China’s O-S-D market share remained relatively flat in 2014, at 56%.

When we look at China’s pragmatic government policies in this area, and combine them with a culture of entrepreneurship and a vast pool of engineering talent, we believe the Chinese semiconductor industry should continue to gain strength over the rest of the decade.

I’d love to hear your opinion in the comments. How do you see China’s semiconductor industry taking shape over the next several years? Are there additional factors you see influencing the space?
Also, I encourage you to stay informed in the coming months as we explore this area more. You can register for updates on our microsite covering China’s impact on the semiconductor industry.

Raman Chitkara leads the global technology practice at PwC.
Read his full biography here.

Don’t forget to follow SemiWiki on LinkedIn HERE…Thank you for your support!

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