China's chip design market will double in size in 2015

IHS iSuppli's research shows that under the stimulation of exports, China's fabless semiconductor market has embarked on a rapid growth path, and sales will have doubled in 2010-2015.

In 2015, the revenue of China's fabless semiconductor company will grow from 5.2 billion U.S. dollars in 2010 to 10.7 billion U.S. dollars. The operating income in 2010 increased by 23.6% from the $4.2 billion in 2009. The operating income in 2011 will reach US$5.74 billion, an increase of 11.3% over 2010.

The demand for mobile phone semiconductors has greatly increased. In 2010, China’s wireless semiconductor companies benefited greatly. Last year, China's mobile phone shipments increased by nearly 60%.

China's fabless supplier Spreadtrum Communications Co., Ltd. has used this growth opportunity to design a variety of semiconductors for mobile phones, including core chip sets, RF transceivers, and total wireless solutions. The company achieved operating income of US$346 million in 2010 and is the first wireless semiconductor company in China with operating revenue of more than US$300 million. Spreadtrum’s 2011 operating income is expected to exceed US$500 million and maintain its leading position.

In order to achieve growth in the next few years, China's fabless semiconductor company may focus on what IHS iSuppli calls "3C": China, Consumer and Convergence.

No factory company will pay attention to China's domestic technology industry and seize this market's expansion opportunities. They must also take advantage of China’s domestic advantages, such as the country’s huge demand.

China's fabless semiconductor supplier must also focus on the consumer electronics industry, because the technology, price and quality that the market emphasizes are the strengths of China's chip design companies.

In addition, China's fabless suppliers must now focus on the functional integration of their products, and smart phones and tablet computers are increasingly popular and are driving this convergence trend. They must also pay attention to the changes in industry and business models brought about by the integration of product features.

However, in order to take the next steps and surpass international competitors, there are three more C companies that China needs to focus on: Culture, Content, and Contribution. These manufacturers must adapt to the different cultures of overseas customers. They must learn more about the terminal content areas that drive the development of the technology market. The Chinese government has introduced a series of incentive policies in investment, taxation, and capital investment to promote the development of the fabless industry. Chinese fabless companies must make use of these government contributions to the industry.

Although the growth prospects of the non-plant industry are bright, they still face some obstacles.

First, the industry has difficulties in infiltrating the logic semiconductor market. In the first half of 2010, the production and assembly capacities were in short supply, and given the relatively small size of domestic non-plant suppliers, it was difficult to obtain production capacity.

The semiconductor market is dominated by a few giants, and the semiconductor industry has to deal with this monopoly structure. The size of China's fabless company is too small, making it even more difficult to compete with large competitors.

The highlight of the fabless industry is that the government has increased its support for it. The Chinese government has introduced new policies for the software and integrated circuit industries this year. The new policy is more flexible. China's non-plant industry is expected to follow a rapid growth track.