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Mainland China IC market growth decelerating in 2014

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Harmeet
New Update

NEW TRIPOLI, USA: Despite massive investments in China's semiconductor industry, demand will exhibit a dramatic slowdown in 2014.

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A sudden drop in our proprietary leading indicators that started as far back as February 2013 points to weakness in economic activity in Mainland China as demand falters at home and abroad. The impact will be a weak semiconductor market and a semiconductor processing equipment market.

"China's semiconductor production growth exceeded 18 percent in 2013, but consumption growth registered only a 15 percent increase," noted Dr. Robert Castellano, president of The Information network.

"For 2014, production will decrease to less than 10 percent year-on-year as a result of weakness on the Chinese economy, although it will outshine the global market which we project will grow 6 percent."

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The Information Network's Proprietary Leading Indicator (PLI) for China is shown. These PLIs, developed and refined since 1995 are unlike econometric models that project from past trends. These cyclical indicators are specifically designed to predict future changes in the direction of the economy. They turn before the economy does.

The semiconductor equipment market will also experience a cutback in sales. This is a multi-prong issue. First there is the slowdown in Chinese semiconductor production. Secondly, there is a backlash from US restrictions placed on Chinese products, particularly solar. Third, Chinese equipment companies have developed competitive products to what is sold from US, European, and Japanese equipment vendors.

"We don't see the Chinese Government's announcement of a $5 billion spend to bolster the IC industry to have much of an impact on semiconductor equipment sales," added Dr. Castellano.

Semiconductor foundry SMIC has already given a glimpse of things to come. The company's revenues including wafer shipments from Wuhan Xinxin was $491.8 million in 4Q13, exhibiting an increase of only 1.2 percent year-over-year, and down 7.9 percent quarter-over-quarter.

In concert with fab building worldwide, growth in the number of fabs in China has been for LED production. China's IC capacity increased only 2 percent in 2013. The market for LEDs worldwide slowed dramatically in 2013, which will minimize any expansion on IC capacity for LEDs in 2014.

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