China's consumer IC market trends

BEIJING, CHINA: CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong, recently released its article on China's consumer IC market development trends.

The market of China's main electronic products grew steadily in 2007, with a market value of 150 billion Yuan. In the next five years, China's consumer IC market will develop smoothly and the market will maintain an upward momentum. However, the growth rate will decrease due to lack of emerging applications. CCID Consulting forecasts that the compound growth rate in the next five years will reach 16.9 percent.

Decreasing growth rate

The Consumer IC market develops the slowest among other IT fields such as computer, network and communication, industrial control, automobile electronics, and other main applications fields. The main reasons lie in sharp decrease of traditional black goods production, which leads to the significant shrinkage of the related IC market.

On the other hand, emerging consumer products such as digital TV and digital photo frame have not form enough scale to drive market development, and digital consumer electronics production develops steadily which leads to a stable digital consumer IC market. Besides, decreasing product price limits the growth rate of China's consumer IC market greatly.

Digital consumer ICs dominating consumer IC market

The market of China's traditional home appliance and small appliance market, including that of color TVs, audio products, washing machines, refrigerators, air conditions, microwave ovens, fans, and electronic toys, has gone from a rapid growth stage to a mature stage, which provides little support for the development of consumer IC market.

On the contrary, as the accelerating replacement of digital consumer electronics to traditional products and corresponding industry transfers to mainland, demands on decoders, memories, high performance processors, graphical processors, and other high end chips will grow rapidly, which drives the upgrading of China's consumer IC market.

As an important consumer product in the next five years, the popularization process of digital TV will drive the development of IC market. Rapid growth of digital TVs will promote a new round of growth of digital TV ICs, embedded CPU, FPGA, memories and other ICs. Besides, set-top box, acting as a transition product from analog age to digital age, will be a leading product for digital TV industry in the future five years.

IC price will first decrease before increasing

In the coming five years, the average price of China's consumer IC market will first come down before going up again, that is, average price will decrease before 2008 and increase after 2008. This trend lies in two contrary influence factors. On one hand, with increasing market scale, the price of consumer electronics will decrease, which bring pressures to IC providers.

The price of general products and high inventory products will fluctuate mostly. On the other hand, IC providers will accelerate product upgrading to provide ICs with larger capacity, higher performance and more functions, which slows down the decrease of IC price. Consumer electronics structure upgrading will drive the demand of higher price ICs, which lifts the average price in the IC market. Driving by these two contrary factors, the average price of China's consumer IC market will first go down before going up in the future.

With a fast-growing consumer electronics market, China's consumer electronics manufactures will face more challenges in choosing product types, IC providers, developing solutions, technology upgrades, and other issues. Besides, as new IC products emerge, consumer electronic manufacturers will need more support on product types, reference design, development tools providing, and R&D staff training.

Facing increasingly fierce competition and globalization IC supply trend, the diversion of industrial divisions in the industrial chain will become more professional. For chip providers, the future lies in the construction of logistics and engineers, third party design plan partners, technology supporting capability, localization and business management.