While consumption of integrated circuits (ICs) in China should be very healthy between 2002-2005, it will be a mixed blessing for equipment manufacturers, according to the report, Mainland China's Semiconductor and Equipment Markets: A Complete Analysis of the Technical, Economic, and Political Issues, recently published by The Information Network (New Tripoli, PA).

China's IC industry is expanding rapidly. In 2003, the country produced 12.4 billion chips, which accounted for just 20% of domestic demand. Most high-end products used in computers and mobile phones had to be imported. Domestic semiconductor companies also had to import designs from overseas companies. Unit production will nearly double to 22 billion units in 2005, but domestic production will grow to meet only 22% of domestic demand.

"The equipment market in China is not what it's cracked out to be," stated Dr. Robert Castellano, president of The Information Network. "IC production is limited to 0.18 microns on 200 mm wafers. Much of the production equipment used in fab expansion are tools transferred from older lines from Japanese and eventually Taiwanese IC manufacturers. Non-Chinese IC manufacturers will buy state-of-the-art 90 nm tools for 300 mm production for their existing facilities and transfer outdated tools to China. In addition, the used equipment market will be huge. Second- and third-tier new equipment vendors will also benefit, as top-tier players have focused on the latest technology."

In 2003, the front-end equipment market saw 18% growth to $1.25 billion on the strength of sales to SMIC, according to the report.

"The Chinese government is investing $10 billion in the semiconductor industry in the next two years to increase production," added Dr. Castellano. "That effort, among others, will encourage additional construction of 300 mm fabs by SMIC and others, resulting in a front-end semiconductor equipment market of $4.2 billion in 2005."

The 340-page report analyzes Mainland China's semiconductor and equipment industries, examining the technical, economic and political issues that are shaping the industry. Markets are forecast from 2001 to 2006.


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