China's IC Industry in Rapid Expansion - TheStreet

China's IC Industry in Rapid Expansion

Mainland China in 2009 produced 40 billion integrated circuits, which accounted for 25.1% of domestic demand as a result of massive building programs and a weak economy.
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Massive investments in China's semiconductor industry are paying off as internal production is making inroads on demand, according to the Information Network's report, "Mainland China's Semiconductor and Equipment Markets: A Complete Analysis Of the Technical, Economic, and Political Issues."

China's integrated circuits industry is expanding rapidly. In 2009, mainland China produced 40 billion ICs, which accounted for 25.1% of domestic demand as a result of massive building programs and the weak economy. In comparison, mainland China produced only 20.9% five years ago.

China's chip industry, once the wunderkind of the semiconductor industry, is broken, a combination of the recession and too little money being spent by the government. Only $7 billion was spent on fabs in the past five years, enough to build only two 300mm fabs.

That's soon to change as the Chinese government is spending as much as $25 billion over the next five years to prop up the industry, including $5 billion for the joint venture between



Suzhou Venture Group

and $5 billion for



Outside investment will continue to generate new fabs, thereby increasing production levels. Numerous foreign companies have set up fabs in China through investment or acquisition. The latest was Taiwan-based

United Microelectronics'

(UMC) - Get Report

acquisition of mainland China chipmaker

Hejian Technology



(INTC) - Get Report

announced plans to build a 300-millimeter wafer fabrication facility in the coastal Northeast China city of Dalian. The $2.5 billion investment for the factory will become Intel's first wafer fab in China and adds significant investment to Intel's existing operations in China. Intel has had a presence in China for over 20 years and will continue to support the evolution of China's computing industry. Construction began in September 2007. Initial production dedicated to chipsets to support the microprocessor business will begin in 2010.

Other foreign companies with a presence in China include

Fairchild Semiconductor



Taiwan Semiconductor Manufacturing

(TSM) - Get Report



(STM) - Get Report


Toshiba Semiconductor



is the largest Chinese foundry in mainland China.

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. The construction of 3G networks and the expansion of mobile TV operations are big areas of opportunity. By 2013, a third of China's IC needs will be met internally.

Robert N. Castellano, Ph.D, is President of The Information Network, a leading consulting and market-research firm for the semiconductor, LCD, HDD and solar industries. Castellano is internationally recognized as one of the leading experts in these areas. He has nearly 25 years of expertise as an industry analyst. Castellano has provided insight on emerging technologies to many business and technical publications, including Business 2.0, BusinessWeek, The Economist, Forbes, Investor's Business Daily, Los Angeles Times Magazine, The New York Times, USA Today and The Wall Street Journal. He is a frequent speaker at conferences and corporate events. He has over 10 years' experience in the field of wafer fabrication at AT&T Bell Laboratories and Stanford University before founding The Information Network in 1985. He has been editor of the peer-reviewed Journal of Active and Passive Electronic Devices since 1985. He is author of the book "Technology Trends in VLSI Manufacturing," published by Gordon and Breach. His book "Solar Cell Processing" was published in 2009 by Old City Publishing. He received his Ph.D. in solid state chemistry from Oxford University.