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Analyst: China's IC manufacturing spend paying off

June 25, 2010 // Dylan McGrath

Analyst: China's IC manufacturing spend  paying off

Semiconductor fabs in China produced 40 billion ICs in 2009, accounting for 25.1 percent of domestic demand, up from 20.9 percent in 2004, according to a new report that concludes that massive investments in China's semiconductor industry are paying dividends.

Robert Castellano, president of market research firm The Information Network (New Tripoli, Pa.) said through a statement that the recession combined with limited investment by the Chinese government has resulted in only $7 billion being spent on fabs in China over the past five years—enough to build only two 300-mm fabs.

But the tide will soon shift, as the Chinese government has earmarked $25 billion in spending for its chip industry over the next five years, including $5 billion for a joint venture between Elpida Inc. and Suzhou Venture Group and $5 billion for SinoChip Semiconductors Ltd., according to Castellano's latest report on the market for chip manufacturing equipment in Mainland China. Castellano predicted that by 2013 one third of China's IC needs will be met internally.

Outside investment will continue to generate new fabs in China, thereby increasing production levels, according to Castellano. A number of foreign companies have set up fabs in China through investment or acquisition, including United Microelectronics Corp.'s acquisition of Chinese foundry He Jian Technology Co. Ltd., Castellano noted.

"Areas propelling the Chinese IC industry are part of the government stimulus program such as projects to supply subsidized electronic goods to rural areas of China," Castellano said. "The construction of 3G networks and the expansion of mobile TV operations are big areas of opportunity."

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