China's semiconductor sales revenue in 2008 is expected to rise 6.7 per cent to reach $81.7bn, up from $76.6bn in 2007, says US analysts iSuppli.
China's fabless semiconductor industry is expected to perform better, expanding by 12.3 per cent to reach $3.5bn in 2008, up from $3.1bn in 2007.
"This growth in fabless IC revenue is being driven by domestic sales of wireless and consumer electronics products, rather than by exports," said Vincent Gu, China research analyst at iSuppli.
More than 550 fabless companies compete in China, says iSuppli. Most of these firms are young and small. More than 88 per cent will generate less than $10 million in revenue during 2008.
The launch of an alternative stock market in Shenzhen, called the Chinese Growth Enterprise Market (GEM), had been expected to prompt a flood of fabless IC Initial Public Offerings (IPOs) in 2008. However, the GEM was not introduced this year because of the current global financial crisis.
Moreover, venture capitalists generally lack interest in China's IC industry. A majority of semiconductor firms are short of capital and face cash flow problems.
"iSuppli expects more than 100 Chinese IC companies to disappear within the next two years," Gu warned, "many companies presently are seeking buyers and a total of four companies already have been acquired by foreign semiconductor firms during the past 12 months. China's fabless IC industry is polarized with about 50 companies achieving success and the remainder struggling to survive. Some companies are losing money and have no mature products available to deliver the revenues needed to continue doing business. Most companies have announced layoffs, cut production lines or have shut down entirely."
However, there are expected to be several Chinese fabless firms that will be seeking IPOs on the NASDAQ and domestic stock exchanges during 2009. iSuppli expects that at least five companies will seek IPOs and at least 10 companies will be involved in mergers next year.