Companies improve technology and production capacity to compete with foreign firms
Chinese semiconductor makers are racing to meet surging demand from local electronics manufacturers, analysts reported today.
But the shortfall between China's chip supply and demand, which was $36bn in revenue last year, will continue to grow as foreign chip manufacturers are providing about 80 per cent of the chips used in Chinese-made products.
"The supply and demand gap will widen to $44bn in 2006," said Dr Robert Castellano, president of research consultancy The Information Network.
China's internal chip production only generated $9bn in sales last year, compared with overseas manufacturers which earned $27bn selling into the local market.
After suffering worse than expected results in the past couple of years, during which some production space was left unused, local chip manufacturers are now expanding capacity and accelerating their climb up the technology ladder.
Problems with production quality and technological level were blamed for an inability to compete with foreign products, despite local demand.
China's largest chipmaker, Semiconductor Manufacturing International Corporation (SMIC), is building its second cutting-edge 300mm wafer plant in Shanghai. The facility is expected to open at the end of this year.
Larger wafer sizes increase production capacity and provide the economies of scale necessary to introduce more advanced, and expensive, technology.
"This will be the most advanced semiconductor plant in China and is likely to receive financial support from the Chinese government," said analyst Tetsuya Wadaki of Nomura Securities in Tokyo.
SMIC will power expansion by upping its spending to $1.1bn this year, an increase of almost 25 per cent, according to Merrill Lynch data cited in the Shanghai Daily.
"The operating climate for other Chinese chipmakers has been showing signs of picking up," said Wadaki.
"Among manufacturers with 200mm or higher production lines, Grace Semiconductor increased its wafer processing capacity from 12,000 to 22,000 wafers in 2005.
"Grace Semiconductor is also planning to increase capital investment now that capacity utilisation rates, previously a cause of concern for the company, have risen to almost 100 per cent."
China's chip manufacturers face tough competition in the market for built-to-order chips from Taiwan's technology leaders, Taiwan Semiconductor and United Microelectronics, which plan to invest a total of more than $3.6bn between them on new technologies, according to researchers at investment bank, Merrill Lynch.
Analysts generally place the two huge Taiwanese chip makers about five years, or two technology generations, ahead of their Chinese rivals.
Chinese semiconductor makers are racing to meet surging demand from local electronics manufacturers, analysts reported today.
But the shortfall between China's chip supply and demand, which was $36bn in revenue last year, will continue to grow as foreign chip manufacturers are providing about 80 per cent of the chips used in Chinese-made products.
"The supply and demand gap will widen to $44bn in 2006," said Dr Robert Castellano, president of research consultancy The Information Network.
China's internal chip production only generated $9bn in sales last year, compared with overseas manufacturers which earned $27bn selling into the local market.
After suffering worse than expected results in the past couple of years, during which some production space was left unused, local chip manufacturers are now expanding capacity and accelerating their climb up the technology ladder.
Problems with production quality and technological level were blamed for an inability to compete with foreign products, despite local demand.
China's largest chipmaker, Semiconductor Manufacturing International Corporation (SMIC), is building its second cutting-edge 300mm wafer plant in Shanghai. The facility is expected to open at the end of this year.
Larger wafer sizes increase production capacity and provide the economies of scale necessary to introduce more advanced, and expensive, technology.
"This will be the most advanced semiconductor plant in China and is likely to receive financial support from the Chinese government," said analyst Tetsuya Wadaki of Nomura Securities in Tokyo.
SMIC will power expansion by upping its spending to $1.1bn this year, an increase of almost 25 per cent, according to Merrill Lynch data cited in the Shanghai Daily.
"The operating climate for other Chinese chipmakers has been showing signs of picking up," said Wadaki.
"Among manufacturers with 200mm or higher production lines, Grace Semiconductor increased its wafer processing capacity from 12,000 to 22,000 wafers in 2005.
"Grace Semiconductor is also planning to increase capital investment now that capacity utilisation rates, previously a cause of concern for the company, have risen to almost 100 per cent."
China's chip manufacturers face tough competition in the market for built-to-order chips from Taiwan's technology leaders, Taiwan Semiconductor and United Microelectronics, which plan to invest a total of more than $3.6bn between them on new technologies, according to researchers at investment bank, Merrill Lynch.
Analysts generally place the two huge Taiwanese chip makers about five years, or two technology generations, ahead of their Chinese rivals.
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