The global recession has put China's semiconductor lighting at risk

ISuppli believes that the global recession has put China's semiconductor industry in jeopardy.

For the past 10 years, the Chinese government has been working to develop the domestic economy to achieve economic independence. The development of highly technical semiconductor industry is regarded as the key to China's long-term economic and technological independence.

The Chinese government promotes the growth of the domestic economy by providing preferential policies to enterprises that are planning to expand manufacturing operations in china. For some time, Chinese companies have used profits to expand production and increase employment. The Chinese government's plan is that Chinese companies and workers ultimately meet the needs of people for the product, and manufacturing engines to be driven by the domestic.

Unfortunately, the plan met with setbacks. In domestic demand has not yet reached the extent of the match with the external demand, the global sales slump.

Science and technology industry, in particular, is the semiconductor manufacturing industry, once regarded as a pillar of China's economic growth, the Chinese government has now become a financial burden. Semiconductor industry investment in production capacity and technology, did not achieve the expected financial returns.

In addition, China's manufacturing industry is likely to be too optimistic about the ability of companies to shut down other parts of the world and turn to lower cost and more efficient manufacturing, adding to the difficulties facing china. As the global economy is in recession, China faces a severe challenge: how to restructure the industry before the collapse of the semiconductor industry.

Looking ahead

What will China's semiconductor industry look like in 2011? Whether the chip suppliers will be merged, the lack of demand will lead to business? China semiconductor manufacturing industry development speed was the envy of the world, but the problem is just a part of the problems faced in the.

The answer to these questions lies in the global economic situation. Semiconductor demand will remain depressed until consumers feel reassured to spend money. Because Chinese enterprises and competitors, and no unique technology, too many of the same capacity in the pursuit of the same market opportunities, so at a disadvantage.

China's factory capacity utilization is currently at record lows, the company's cash flow simply can not achieve gains and losses two.

The larger the enterprise, the greater the problem?

The second most important question is: if a merger with a similar technology, will only produce larger companies facing greater cash flow problem?

At first glance, this is the most likely outcome. However, there is a side effect will significantly affect China's corporate structure: the larger the company, the greater the likelihood of survival.

No recovery until 2012

How long will the chaos of China's semiconductor industry last? Although this problem is difficult to predict, but by observing the capacity utilization of China's semiconductor companies, you can see the clue.

ISuppli expects China's manufacturing sector will not recover until 2012. Due to the serious decline in demand, cash flow is negative for weaker companies, is unlikely to hold out for two years.

ISuppli expects the first merger will be finalized in the second quarter of 2009. This will imply that time is the key to determining whether an enterprise can withstand the current plight of the test. ISuppli predicts that by the second half of 2010, the size of the smaller but stronger Chinese semiconductor industry will emerge.