Semiconductor companies which don't have a strong foothold in the Chinese marketplace need to ramp up their business development efforts to increase their market share, says PricewaterhouseCoopers, adding that those who fail to do so will struggle to retain their foothold in the global semiconductor marketplace.
The electronic systems manufacturers in China continue to increase their consumption of semiconductors at three to five times the worldwide rate. As a result, China's semiconductor consumption market grew by nearly 17% in 2008 to reach US$104 billion, accounting for more than one third of the worldwide market. Since 2001 China's semiconductor consumption has grown at a 29.5% compounded annual growth rate (CAGR) while total worldwide consumption has grown at only 8.6% CAGR.
"As the markets start to improve, China will continue to drive the next business cycle in the semiconductor industry due to its rapid urbanisation, increasing consumer consumption and green energy initiatives," says Raman Chitkara, Global Technology Industry Leader, PricewaterhouseCoopers.
According to PricewaterhouseCoopers' China's Impact on the Semiconductor Industry: 2009 Update Report, companies should consider exploring acquisition or partnering opportunities with Chinese companies, as the non-Chinese companies can bring considerable market intelligence to bear on the local Chinese market.
The report also suggests that companies participate in the Chinese government's stimulus programmes, both consumer and infrastructure. PwC urges companies to work with qualified OEM suppliers and design or modify products to provide features that best serve these markets. "Despite the investment of over 4 trillion RMB (US$586 billion) in economic stimulus programmes these programmes will need huge investments in advanced technology. This creates a superb opportunity for semiconductor companies to team with the Chinese government agencies to address how to plan, develop and provide the required advanced technology support," says the PwC report.
The PwC report also advises companies to closely monitor China's evolving standards as, should they be successful, they may provide effective solutions for specific developing country environments.
Another suggestion is to transfer mature product lines to China which could extend competitiveness of these lines as well as free up capacity and resources.
"China's leading original equipment manufacturers are purchasing a significant and increasing number of semiconductor devices. They could be important customers for many of the international semiconductor companies intending to participate in the continuing growth of the Chinese semiconductor market," says Shanghai-based PricewaterhouseCoopers China Assurance Partner Ergun Genc. "In addition, integrated circuit (IC) design was the only segment of the China's IC industry to achieve positive growth in 2008. Much of the relative resilience of the China's indigenous IC design sector during the 2008 semiconductor industry downturn has been contributed by those companies that have concentrated on designing for China's growing domestic market."