Designed in China: Domestically conceived chip market booms in nation

The story is familiar – Foreign companies come into a country to tap into its low cost labour. Sooner or later the low cost factor erodes and those foreign companies move out to newer pastures.

This is what also happened to the semiconductor industry in China. Foreign electronic equipment manufacturers come to tap into its relatively low cost labour. With the global economy going south, they decelerate the pace of their manufacturing outsourcing to China resulting into negative impact of the country. However, this negative impact has partially been off-set by a transformation in the country wherein there is now an increased focus on designing chips for electronic products that are popular in the nation - and thus tapping its own vast domestic market.

Demand for these locally designed chips is being driven mainly by China and Hong Kong-based electronics OEMs and contract manufacturers with foreign ODMs that develop and manufacture goods for Chinese OEMs also chipping in.

The initial manufacturing outsourcing to China had resulted into a large number of local design houses – they are now tapping the domestic market.

The largest application for Chinese designed semiconductors in 2007 was Mobile handsets followed by notebook PCs. But the fastest growing segment for domestically designed semiconductors over the next few years will be mobile communications infrastructure equipment - not surprising as the country is home to two of teh world’s bigger players i.e. Huawei and ZTE who incidentally are aggresively targetting the international markets for their growth.

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