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Scaling
China's
"Great Silicon Wall"
The
Chinese Government is pushing the Electronics Industry
forward as one of the "Four Pillars" driving
economic growth. However, entering what is the largest
consumer market in history has been anything but simple,
and the price being paid by outsiders to play here may
turn out to be high, according to a recent Cahners In-Stat
Report.
China's
Electronics Growth 1990-1997
($ billions)
Source: Cahners In-Stat Group
The
size of the Chinese electronics market is one-tenth that
of the U.S., but that figure is expected to rise rapidly
over the next 15 years on the wings of 20 percent to 40
percent growth rates in PCS, semiconductors and telecommunications.
To date, the electronics industry has remained insulated
from the effects of the surrounding Asia Pacific Crisis
as the intensified domestic consumer demand grew at a
pace strong enough to compensate for falling exports.
As the domestic focus of the electronics industry shifted
from the Special Economic Zones of the coastal region
to the larger interior industrial centers, the Electronics
Industry has grown steadily from $8.1 billion in 1990
to $55.4 billion in 1997, the latest years for which total
electronics market figures are available.
Recent
conditions in the Asia Pacific region led China to unveil
a $1.2 trillion, three-year plan to keep the economic
crises at bay. Most of the funding is for public-works
projects. Cahners In-Stat says it is designed to keep
unemployment low and let the economy expand at 8.0% annually.
Premier Zhu went about tackling the thorny problem of
shutting down profitless state factories, curbing corruption,
streamlining the bloated bureaucracy, cleaning up the
banking system and privatizing housing. While the Chinese
economy was growing, Zhu estimated the country would be
able to better absorb the shocks of reform. Unfortunately,
Zhu was incorrect.
Millions
of unemployed are clogging the cities with protests occurring
almost daily. Consumers are not purchasing as expected,
the Cahners In-Stat research reports. "Privatizing
housing has stalled and state factories continue to churn
out unwanted products," says analyst Grant Johnson.
"Most troubling is that many foreign investors, irritated
by China's recent policies, are beginning to re-think
their commitment to China. Right when China needs outside
capital the most, investor fatigue is deepening and many
analysts predict foreign investment could drop from $45.0
billion in 1998 to $30.0 billion in 1999."
Cahners
In-Stat Group forecasts real GDP growth to slow to 6.0%
in 1999 with the possibility of further declines contingent
on the economy's recent stagnation. "Remember, it
is always disconcerting how the Chinese officials are
able to announce how fast the economy grew before the
year is even over," Johnson notes. "Economists
remain skeptical about the statistics that come from the
Central Government most years, as it is almost impossible
to verify these figures in the closed economy."
While
The Chinese Ministry of Electronics maintains a tight
control on who does business in this market, multinationals
are willing to play by its restrictive rules in order
to get a foothold in China. International chip industry
leaders are positioning themselves in China through joint
ventures and technology transfers, lured by the huge potential
of this space.
Report Information
Tapping
into the vast Chinese electronics market does come with
conditions and definite external risks. The Cahners In-Stat
Group report, Scaling China's "Great Silicon Wall,"
provides an in-depth analysis of the risk/ reward equation
for chipmakers contemplating entrance into China. Gaining
access to China's semiconductor market does not come cheap
or with any solid assurances, but as this report demonstrates,
chipmakers have thrown caution to the wind and the rush
is on to conquer this uncharted frontier. The report includes
a Chinese Total Semiconductor Forecast through 2001, as
well as Chinese electronics consumption, electronics production,
semiconductor fab operations, and GDP growth data.
How
to buy this report
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