China's chip industry is growing fast, moving upmarket and shifting westward. Those are the main conclusions of a report from CCID Consulting that says the revenue of China's integrated circuit sector grew 43% in 2006 to exceed 100bn yuan for the first time.
The growth in the number of ICs made in China last year was slightly less at 36%, which means the average selling price for Chinese chips is increasing. Against a market backdrop in which ASPs for chips tend to fall, that suggests China's chip sector is moving to pricier products with higher added-value.
The CCID report notes that growth in China's chip industry is accelerating. The increase for 2006 over 2005 in both sales revenue and number of ICs made was much higher than the increases for 2005 over 2004, which where 29% and 19% respectively.
As CCID points out, it took nearly ten years for China's IC industry to grow from annual turnover of 1bn yuan in the early 1990s to break through 10bn in 2000. But it has taken just 6 years for it to grow from 10bn yuan to 100bn yuan.
And the future also looks bright. For the next five years, chip sales are expected to grow at a CAGR of more than 27%. By 2011, the industry's sales will exceed 300bn yuan and China will then have become “one of the world's most important IC manufacturing bases,” predicts CCID.
One of the most interesting findings in the report is that new development in China's chip industry is shifting westward because of of rising costs in the eastern seaboard, its traditional home.
Provinces and cities in the west such as Xi'an, Chengdu and Chongqing have became the new popular spots for investment in the IC industry, particularly in the packaging and testing sector, which is an area where China's strengths are well established.
SMIC has a packaging plant in Chengdu, On Semiconductor has one in Leshan and Intel has established a packing base in Chengdu.
Joining the fray, US chip maker Micron Technology officially opened its Xi'an plant earlier this week (see picture above). The 180,000 sq ft facility, which will cost around $250m, is expected to be completed by the end of 2008 when it will employ up to 2,000 employees. The plant is Micron's second assembly and test facility in Asia — the first opened in Singapore in 1998.
Micron's Xi'an facility will be one of the largest investments of the 860 foreign-invested companies operating in the Xi'an Hi- Tech Zone in Shaanxi province.