China's semiconductor market will decrease to $68 billion in 2009, down 6.7 percent from $72.9 billion in 2008. While this is a significant decline for the Chinese semiconductor market, which has consistently generated strong growth in past years, it's far less than the 16.5 percent drop expected for the global chip industry in 2009. Falling exports are the main culprit for the decline.

iSuppli forecasts that the China semiconductor market will grow by 17.8 percent in 2010 to reach $80.1 billion.

"Because of the Chinese government's economic stimulus package, the country's domestic electronics market started rebounding in the first quarter of 2009," said Kevin Wang, director, China research for iSuppli. "This fueled a subsequent recovery in semiconductor demand that limited the decline in 2009 and set the stage for a return to double-digit percentage growth in 2010."

Automotive market stays in gear

Automotive electronics represents the only major application market that will generate an increase in semiconductor demand in 2009, with chip revenue rising to $2 billion, up 11 percent from $1.8 billion in 2008. With the global automotive market in the dumps, China's domestic sales will drive the increase.

"The Chinese government's efforts to stimulate domestic car demand has been very successful," Wang said. "In addition to subsidies, the government is reducing the consumption tax for purchasing a car with an engine smaller than 1.6 liters. Because of this, iSuppli expects that China's automobile market will expand to 12 million units in 2009, up 33 percent from 2008."

As the global car market recovers in 2010, China's automotive semiconductor growth is expected to accelerate to 19.7 percent, reaching revenue of $2.4 billion for the year.

Consumer electronics chip market looks to 2010

The consumer electronics chip market in China will not fare so well in 2009, with revenue declining to $15.3 billion, down 11.6 percent from $17.3 billion in 2008.

However, there are some bright spots in the nation's consumer electronics market this year.
"Thanks to China's Home Appliance Products to Rural Area stimulus program, the domestic LCD-TV market will expand dramatically this year," Wang said. "iSuppli expects China's domestic LCD-TV market will expand to more than 24 million units in 2009, up 80 percent from 2008."

The market for white-good appliances also will greatly benefit from the governmental subsidy policy this year. Chinese white-goods makers, such as HiSense, Haier and Changhong, are garnering the largest subsidies because the price of their products for governmental bids is lower.

Conditions will shift dramatically in 2010 for China's consumer electronics segment as the global economy improves and exports recover, with revenue rising to $17.8 billion, up 16.3 percent from 2009.

Wireless communications market wavers

China's wireless communications semiconductor market is set to decline to $16.3 billion in 2009, down 7.6 percent from $17.7 billion in 2008.

However, ongoing voice-service fee reductions and declines in average handset selling prices will assure stable growth for China's mobile subscribers during the next five years. iSuppli expects that China's domestic handset market will grow to 260 million units in 2010. Meanwhile, the 3G handset market will rise to more than 25 million units.

Smart phones will be a popular product in 2010.
These factors will allow China's wireless semiconductor market to expand to $20.3 billion in 2010, up a robust 24.3 percent from 2009.

Besides 3G smart phones, other products expected to enjoy strong growth in 2010 include netbooks, Blu-ray DVD players, LCD-TVs, energy meters, surveillance and medical electronics.