PwC sees China growth despite IP fears
China consumed about 40 percent of the world’s $298 billion in semiconductors in 2010, a slice set to expand to 50 percent as it grows as a systems maker to the world, according to a PwC report published late last year. The country now makes more than 70 percent of all handsets and PCs and nearly half all color TVs, it said.
China’s chip consumption is still outgrowing the scale and sophistication of its internal chip production, opening a door to future opportunities, said Raman Chitkara, a PwC partner and head of the company’s technology practice based in Silicon Valley.
"As China’s domestic [systems] market becomes a bigger piece of the pie, if companies want to participate in that they have to have a meaningful local presence in China, and I’m not sure that’s fully understood," Chitkara said.
"Some people are focused on IP protection and the result may not be fully realizing the potential to play a more meaningful role in China," he said.
China’s current five-year plan includes eight initiatives, many focused on increasing its industrial competitiveness and domestic consumption and reducing the technology gap between China and rest of the world. "There’s not a single Chinese chip company among its top semiconductor suppliers," Chitkara said.
So far, China’s hopes to become a major chip foundry have been disappointing in scale and sophistication, he said. The recent consolidation of China’s second and third largest fabs is a step in the right direction, but eased trade restrictions with Taiwan could open the door to that country’s foundries lending a bigger hand, he added.
Meanwhile multi-nationals including Intel and Samsung are opening fabs in China, another opportunity to participate in the country’s growth. Intel is by far China’s largest chip supplier with local revenues of about $19 billion.
China is already credited for driving down prices of crystalline solar panels, a factor cited in the recent closure of Silicon Valley startup Solyndra. The country is also accelerating its production of LEDs, but is not likely to dominate either market, Chitkara said.
From 2008 to 2010, China’s LED production revenue grew by almost 58 percent to more than $4 billion, the PwC report said. As of July 2011, there were 69 LED makers in China, 49 in full production, eight ramping up and twelve under construction, it added.
Although most of China’s tech companies are still relatively small, the country’s financial markets are providing them a platform for growth. "When you look at the global tech IPO forecast you see a rich presence of Chinese companies, the number of which now exceeds those in the US," Chitkara said.
Indeed, China had 67 tech IPOs in 2010 compared to 19 in the US. China accounted for 70 percent of total semiconductor IPOs during 2010, according to the PwC report.
Twenty-six of China’s 30 IPOs in 2010 were handled by China’s stock exchanges, many of them in Shenzhen, the host for nearly half the tech IPOs in 2010. "Ten years ago those IPOs would have occurred on NASDAQ," Chitkara said.
If you enjoyed this article, you will like the following ones: don't miss them by subscribing to :
