industry, generating revenues of U.S. $5.4 billion (46 percent CAGR) in 2010, up from U.S. $178 million in 2001.21

In 2010, China’s semiconductor packaging, assembly, and test (SPA&T) sector also experienced positive growth (~27 percent) with revenues of U.S. $9.3 billion, representing 20 percent of worldwide SPA&T facilities.22 China’s O-S-D sector, in particular its light-emitting diode industries, experienced similar growth with revenues more than twice that of its SPA&T sector (U.S. $23.4 billion). In addition, revenues generated in 2010 by China’s wafer foundries grew by more than 45 percent, accounting for ~11 percent of worldwide foundry revenues.

2.5.3 Contribution to the Global Semiconductor Value Chain

To assess China’s position in the global semiconductor value chain, it is important to assess China’s strengths and weaknesses along each step of the value chain. Table 2-3 reports disaggregated semiconductor value chain revenue generated both by China and worldwide. The data illustrates that China currently acts primarily as a semiconductor consumer, accounting for ~37 percent of the worldwide semiconductor value chain. While the majority of these semiconductors consumed in China were ultimately exported for sale outside of China, more than one-third were used in electronic products consumed within China.

In contrast, China’s contribution as a semiconductor producer, that is, sales, only accounts for ~8 percent (total sales in China divided by total worldwide revenue) of the worldwide value chain. Although its aggregated contributions as a semiconductor provider remains low, China is also a strong contributor to worldwide discrete device revenues and continues to develop its IC design capabilities.

2.5.4: Summary of China’s Position in the Global Semiconductor Value Chain

In the last several years, China has steadily increased its position in the global semiconductor value chain—particularly as a consumer of semiconductor devices. China’s IC design industry has also made significant gains. However, numerous challenges remain that have the potential to reduce China’s overall position in the value chain, as well as to alleviate concerns that the semiconductor value chain is threatened in the near term. While China has certainly emerged as what might be termed the dominant global factory for IT equipment, all products manufactured in China could also be manufactured elsewhere if there was an interruption in trade with China. In addition, the overwhelming majority of suppliers to China’s semiconductor market are foreign companies.

TABLE 2-3 China’s 2010 Contribution to Worldwide Semiconductor Value Chain Revenue (in Billions of U.S. Dollars)

  Worldwide Revenue Sales China Consumption
Electronic Design Automation 4.2 N/A 0.31
Semiconductor Intellectual Property 1.5 N/A 0.12
Equipment 39.5 0.10 3.63
Materials 43.6 0.43 4.15
IDMs 224.7 18.9 99.6
Fabless 73.6 5.4 32.4
Foundries 30.2 3.2 13.4
SATS 23.6 9.1 10.4
Total 440.9 36.6 164.01

Adapted from the PwC report: Continued growth: China’s impact on the semiconductor industry –2011 update, including source material from CSIA, EDAC, Gartner Dataquest, GSA, and SEMI (available at www.pwc.com).

While China’s IC design industry continues to experience strong growth, it lags behind the United States, Japan, Taiwan, and Korea in terms of process technology and design line width. This is partly a result of (1) lacking or technologically inferior Chinese suppliers of electronic design automation tools and software and domestic licensors of IC design-related intellectual property and (2) significant supply-side constraints (e.g., intense competition and price wars) that have bankrupted many of China’s domestic IC houses. In addition, a narrow focus on low- and middle-end consumer products threatens to constrain the growth of China’s IC design industry. By fueling its dependence on

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21See China High-Tech Industry Development Almanac (images/img-43-2.jpg 2010). Last accessed on February 23, 2012

22See semi.org.cn (images/img-43-3.jpg). Last accessed on February 23, 2012.



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