The growth rate of the country's seminconductor consumption has been decelerating for the past four years, from the peak of 41.2 percent in 2004 down to 16.8 percent in 2008 in dollar terms, according to an industry report released by PricewaterhouseCoopers (PwC), a leading US accounting firm.

When measured in yuan terms, the growth rate in 2008 was only 6.7 percent, the first year the semiconductor consumption market declined to single-digit growth since the early 1990s, the report said.

The slowdown in the growth rate was caused by the global financial crisis and a 2008 downturn in a seven-year business cycle, PwC China Assurance Partner Ergun Genc said in a telephone conference in Shanghai.

The Chinese market will keep growing, albeit at a much slower rate, which will likely be closer to the worldwide annual growth rate of 8.6 percent, Genc said.

China became the largest semiconductor market in the world in 2005, and it accounted for a worldwide market share of 38.3 percent in 2008, when the entire global market was worth $2.5 trillion, according to the report.

However, the top 10 chip suppliers to the country in terms of market share are all non-Chinese mainland multinationals, including Intel, Samsung and Toshiba, according to PwC. The 10 powerhouses annually supply over 50 percent of the integrated circuit market, one of the major semiconductor sector in China.

Because of the restrictions on high-tech equipment exports from the US, Chinese chipmakers' technology lags two generations behind the multinationals', said Liu Wenping, analyst at JLM Pacific Epoch, an independent consultancy in Shanghai.

Instead of competing with the international giants in the high-end markets, such as computers, there could be opportunities for the local firms to design and produce chips for TV sets and other home appliances, Liu said.

China is the largest site for low-cost consumer electronics production, and PwC expects a significant growth in need for the semiconductors used in products made for domestic use over the next five years.

Designing products that meet the specific requirements of the local market "is going to be the number one success factor for local companies," Genc of PwC said.

The indigenous companies have advantages in designing for the marketplace because they are more familiar with China's unique standards, like TD-SCDMA, Genc said. He suggested they participate in the national consumer stimulus programs which could translate into $50 billion in semiconductor consumption in four years.

Chinese companies have to seize this opportunity and not let only foreign multinationals reap the benefits, Genc added.