EL SEGUNDO, USA: After years of double-digit annual growth, China's semiconductor sales revenue in 2008 is expected to rise by only 6.7 percent to reach $81.7 billion, up from $76.6 billion in 2007, iSuppli Corp. predicts.

However, China's fabless IC industry is expected to perform better, expanding by 12.3 percent to reach $3.5 billion in 2008, up from $3.1 billion in 2007.

Vincent Gu, China research analyst at iSuppli, said: "This growth in fabless IC revenue is being driven by domestic sales of wireless and consumer electronics products, rather than by exports. Moreover, the Summer Olympic events in Beijing and other Chinese cities this year encouraged the release of new mobile handsets supporting the 3G, Digital Terrestrial Multimedia Broadcast (DTMB) and China Mobile Multimedia Broadcasting (CMMB) standards, boosting sales of associated ICs."

China's domestic market situation improved in 2008 despite regulatory restrictions and an incomplete supply chain. Popular applications supporting new domestic standards will appear in 2009 as their industrial ecosystems mature. Although there is substantial economic uncertainty, continued revenue growth is anticipated in 2009.

Heavy competition
Today, more than 550 fabless companies compete in China. Most of these firms are young and small. More than 88 percent will generate less than $10 million in revenue during 2008 and are struggling to continue their growth.

There are four major success factors in China's IC fabless industry:
market, manpower, money and timing. The US fablessIC companies have advantages in the areas of technology and innovation. This frequently makes them winners in emerging markets. In contrast, Taiwanese companies have effective cost controls and are highly integrated, helping them to succeed in mature markets.