another bubble forming, this time in China's electronics sector. Market
research firm iSuppli fears that China's electronics manufacturers
could be hard hit by the fallout if China's overheating economy catches a cold.

Byron Wu, iSuppli analyst, wonders how long Chinese OEMs can
continue expanding their sales, whether buying power will continue to
increase among consumers and whether exports will remain on the rise.

But Wu said these factors do not represent a major risk for the
semiconductor industry, where growth has actually decelerated compared
to a few years ago. After expanding by almost 40% in 2004, China's chip
industry has settled into a more sustainable average growth rate
ranging from 10 to 20%.

For 2007, semiconductor shipments in China are predicted to rise 20%
to almost $52bn. This compares to 15 percent revenue growth in 2006.
The current year will represent the cyclical peak for China's chip
market, with growth expected to cool in the coming years.

No surprise to hear that one of the hottest segments of China's
electronics OEMs is flat-panel televisions, which are rapidly replacing
CRT sets in China and elsewhere. By 2010, China's output of flat-panel
televisions will surpass CRT TVs.

Other lucrative areas include digital set-top boxes, 3G mobile
phones and so-called Digital Multimedia Platforms (DMPs). DMPs are
converged personal multimedia products that combine functions, such as
MP3 players with mobile TV, MP3 players with GPS, and digital still
cameras that double as camcorders.

The iSuppli figures were unveiled at a recent World Semiconductor
Trade Statistics (WSTS) committee meeting which, for the first time,
was held in China. That alone speaks volumes for the growing importance
of China's electronics industry to the world's chipmakers.

Elsewhere on the electronics front:

  • TCL, the Chinese TV manufacturer, saw its loss for 2006 widen to
    HK$2.5bn compared to less than HK$600m in 2005. Overall performance was
    heavily affected by TCL's heavily loss-making European operations which
    previously operated as a JV between TCL Multimedia and Thomson of
    France. That business was officially declared insolvent last week but
    TCL Multimedia continues to operate in Europe, although the TVs are no
    longer made in France. The drastic medicine appears to have worked as
    TCL forecasts it will make its first-ever profit in Europe next year.

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