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CCID Consulting: Review and Forecast on China's ICs Industry

2009-02-23 19:16 990

BEIJING, Feb. 23 /PRNewswire-Asia/ -- CCID Consulting, China's leading research, consulting and IT outsourcing service provider, and the first Chinese consulting firm listed in Hong Kong (Hong Kong Stock Exchange: HK08235), recently reviewed China's IC industry.

The year 2008 saw significant changes in China's ICs industry. On the one hand, the world semi-conductor market plunged into recession with the deepening of the global financial crisis; on the other hand, China's economic growth and exports gradually slowed down, adding to the decline in the grow rate of the domestic semi-conductor markets. Affected by these factors, the development pace of China's ICs industry slowed down on a quarter-by-quarter basis, with the annual scale of overall sales in the industry around RMB 130 billion and the growth rate of only 5%, down dramatically compared with the 24.3% growth rate in 2007.

In terms of the development of domestic ICs design, chips manufacturing and packaging & testing sectors in 2008, these three sectors are affected to greater or lesser extent by the market downturn, with the chips manufacturing sector suffered most among them. The annual growth of the scale of domestic chips manufacturing industry is only 1%, and various manufacturers have more or less experienced idled production capabilities and declined performance. Despite decline in orders and under-capacity operation in general, the packaging & testing sector is comparatively sound with the industry-wide annual growth rate at around 7%. Though the ICs design sector is affected by the slowdown in the domestic market demand, the efforts in technological upgrade and product innovation made by major enterprises in this sector have to some extent overcome the difficulties and recovered some market demands. The annual growth rate of the sector will remain at around 7.5%, much higher than the sector's overall growth.

When it comes to the major factors that affect China's ICs industry development, apart from domestic market demands, industry investment, exports and RMB exchange rates are also the crucial factors that have impact on the industry's operation. Currently, more than 70% of sales volume in the domestic ICs industry comes from exports, and the export environment directly determine the industry' performance. The fact that domestic ICs exports decrease with each passing month this year is a good testimony to this. Given that the global semi-conductor market in 2009 is likely to experience a negative growth for the first time in eight years, the export situation of IC products next year is anything but optimistic, and it will have negative impact on the industry's performance to a further step.

Given that exports account for a very large proportion in the sales volume of the industry, RMB exchange rate fluctuations also have huge impact on the performance of the domestic ICs industry. Due to the rapid appreciation of RMB in recent years, the domestic ICs enterprises have all incurred exchange losses to some extent. It is estimated that every 1% appreciation of RMB to U.S. dollar would cause 1.2% to 1.4% decrease of the domestic ICs industry's overall sales volume. Currently, the exchange rate of RMB to U.S. dollar basically stabilizes at the level 6.8:1 and RMB tends to depreciate further. In 2009, the impact of exchange rate fluctuations on the domestic ICs industry will be significantly reduced.

Investment has long been the major force driving the scale expansion of the domestic ICs industry. The analysis on the changes in investment and industry scales in the domestic ICs industry over the past years indicates that the industry's investment scale reached its peak in 2004 while the growth rate of industry scale in 2006 was also on the high end of the spectrum (An ICs project usually takes one and a half years to two years, from its development to operation.) In the three years followed (05, 06, 07), the industry's investment scales decreased year by year, and the industry growth rate in 2007 and 2008 also showed the tendency of decrease year by year. Given that the industry investment again decreased in 2007 as opposed to 2006, correspondingly, the growth rate of the domestic ICs industry is expected to drop further in 2009 compared with 2008.

Taking various factors into consideration, CCID expects 2009 to be a year of unprecedented difficulties for China's ICs industry. On the one hand, the sagging domestic and international market would lead to sluggish internal sales and declined exports; on the other hand, there are few new projects to spur the market. Though the stability and expected depreciation of RMB exchange rate is good news to the industry, it is still hard-pressed to offset the market-level negative impact. Taken as a whole, the domestic ICs industry in 2009 is expected to maintain its growth momentum, yet the growth rate will continue to drop. It is predicted that the overall growth rate of the industry will be in the neighborhood of 4% next year. The growth rate for the ICs design sector will remain at around 7%, and the growth rate for the chips manufacturing and packaging & testing sectors will decline to some extent compared with 2007. Meanwhile, economic profits in the domestic ICs industry will erode significantly, and it is very likely that the industry as a whole will incur loss.

About CCID Consulting

CCID Consulting Co., Ltd. (hereinafter known as CCID Consulting), the first Chinese consulting firm listed in the Growth Enterprise Market of the Stock Exchange (GEM) of Hong Kong (stock code: 8235.HK), is directly affiliated with China Center for Information Industry Development (hereinafter known as CCID Group). Headquartered in Beijing, CCID Consulting has so far set up branch offices in Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu, with over 300 professional consultants after many years of development. The company's business scope has covered over 200 large and medium-sized cities in China.

Based on major areas of competitiveness: industrial resources, information technology and data channels, CCID Consulting provides customers with public policy establishment, industry competitiveness upgrading, development strategy and planning, marketing strategy and research, HR management, IT programming and management. CCID Consulting's customers range from industrial users in electronics, telecommunications, energy, finance, automobile, to government departments at all levels and diversified industrial parks. CCID Consulting commits itself to becoming the No. 1 advisor for enterprise management, the No. 1 consultancy for government decisions and the No. 1 brand for informatization consulting.

For more information, please contact:

Cynthia Liu

Coordinating Manager

CCID Consulting Co., Ltd.

Tel: +86-10-8855-9080

Email: liuyan@ccidconsulting.com

Source: CCID Consulting Co., Ltd.
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