China's semiconductor market is expected to decline by 5.8% to $72bn in 2009, down from $76.5bn in 2008, according to market researcher iSuppli.
"Such a downturn is remarkable for an region long regarded as a vigorous and reliable growth driver for global semiconductor market," said Kevin Wang, senior manager of China research at iSuppli.
"Even during the disastrous year of 2001, when global semiconductor revenue plunged by 28.6%, China's industry managed to surge by 24.4%. With global semiconductor revenue expected to decline by 9.4% in 2009, and with consumer confidence at risk of falling further, China’s semiconductor outlook could dim even more than iSuppli presently forecasts."
Despite this, iSuppli predicts growth will return in 2010, with a smart revenue rebound of 9%, followed by an 11% increase in 2011.
"China's economy has been increasingly affected by the financial crisis in developed countries since the third quarter of 2008," Wang said. "Many small consumer electronics factories in Guangdong province closed because of lower sales orders and cash flow problems. Market conditions became even more negative in the fourth quarter of 2008. Most small firms saw their business decline by more than 40%, especially at low-tech, labour-intensive and export-oriented companies."
To stimulate the economy, the Chinese government cut interest rates four times within two months starting in October 2008. Moreover, a stimulus package estimated at around $570bn will be implemented during the next two years. The government's Home Appliances for Rural Areas project is an example of just one measure intended to stimulate domestic demand.