China’s reported 2014 semiconductor industry revenue growth continued to exceed both its semiconductor consumption and the worldwide semiconductor market growth. China’s semiconductor industry grew by 17.5% in 2014 to a record US $77.3bn. China’s semiconductor industry has grown at an equal or greater rate than its semiconductor market consumption for eight of the past ten years. From 2004 through 2014 China’s semiconductor industry grew at a ten-year compound annual growth rate (CAGR) of 20.5% while its semiconductor consumption grew at a 16.7% and the worldwide semiconductor market at a 4.7% CAGR. China’s share of the worldwide semiconductor industry is continuing to grow and become significant. Compared to the sum of worldwide semiconductor device sales revenue plus the value of all wafer fabrication and packaging, assembly and test production, China’s 2014 semiconductor industry revenues accounted for 13.4% of the worldwide semiconductor industry, up from 12% in 2013 and 11.6% in 2012.
The overall performance of China’s IC industry (the sum of IC design, IC wafer manufacturing and IC packaging and testing) continued to be the major contributor to China’s overall semiconductor industry growth in 2014. It grew by 20.4% in 2014 while China’s O-S-D industry revenue only grew by 12.9%. Since 2010 China’s IC industry revenues have more than doubled, growing 130%, while China’s O-S-D industry revenues only increased by two-thirds, growing 68%. China’s 2014 IC industry revenues of US$49.1bn were nearly twice their O-S-D revenues of US$28.2bn.
The distribution of China’s semiconductor industry revenue continued its gradual shift towards the IC sectors in 2014. From 2004 through 2014 the once small IC design sector has grown at a 33% CAGR while the larger IC packaging and test sector achieved a 19.6% CAGR. The much larger O-S-D and smaller IC manufacturing sectors have only grown at an 18% CAGR. As a result, China’s three IC industry sectors have grown from 51.5% to 63.6% of China’s total semiconductor industry.
During 2014 IC design grew 29.7%, IC manufacturing 18.7%, IC packaging and test 14.4% and O-S-D 12.8%, slightly changing their relative share but not the order of their distribution which became:
China’s IC consumption/production gap increased again in 2014 to a new record annual high despite all the various government plans and efforts to reduce it. This gap is the yearly difference between IC consumption and IC industry revenues. Based upon the most recent CSIA industry statistics, this annual gap grew by a further US$11.9bn (11.0%) in 2014 to reach US$20.1bn. During the eleven year span of our reports on China’s semiconductor industry, this gap has grown from US$20.8bn in 2003 to US$120.1bn in 2013, widening every year except 2009. The ratio of China’s IC production revenue to IC consumption has shown some improvement. It had grown with yearly variability from 17% in 2001 to a peak of 29% in 2014. According to CSIA, this ratio is now expected to increase to 36% by 2017, which is up from the 32% they had forecast for 2016 a year ago. However, this will still result in a further increase in China’s IC consumption/production gap which is now forecast to reach US$151.5bn in 2017 despite all the Chinese government’s plans and efforts to reduce it. It is our belief that this gap continues to contribute to the Chinese government’s ongoing initiatives to increase indigenous IC production.