mobileboy.jpgWe never thought we would see a time when China would save the day for a US chip company. Nevertheless, Altera, the Silicon Valley-based maker of communications chips, has just upgraded its first quarter sales prediction because of better than expected demand from manufacturers selling kit for China's new 3G mobile phone networks.

Overall, however, sales conditions remain “muted” as a result of slowing global business conditions and the chip maker predicts a sequential drop in revenues of 15 to 20% in Q1.

Altera makes programmable logic devices, which fill the gap between completely custom-designed chips — whose cost and lead times are high — and off-the-shelf commodity chips. PLDs have found a key new market with makers of equipment for mobile networks as programmable hardware allows them to better cope with high-bandwidth requirements, dynamic marketplace and evolving wireless technologies.

Altera is one of several foreign companies benefiting from China's long overdue decision to award licences for new 3G networks, which offer high bandwidth but require substantial investment both in network equipment and in 3G-capable handsets.

Taiwan's Mediatek is also benefiting from a government-engineered mobile boom in China, according to this Financial Times article.

It predicts that Q1 sales will be much higher than forecast due to robust demand from China. Mediatek is Taiwan's biggest fabless semiconductor company and it specialises in designs for chips that go into low-priced phones. According to the FT, Mediatek is one of the big beneficiaries of the Chinese government's initiative to subsidise purchases of electronic goods in rural areas.

This initiative, which began nationwide at the beginning of this year, run for four years and offers subsidies of 13% on goods that cost less than 1,000 yuan. That effectively favours purchases of low-end mobile phones instead of big-ticket items like TVs or camcorders.

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