Unique Landscape: 2009 turning point in Chinas IC industry

---- ISuppli senior analyst Gu Wenjun

No doubt that this crisis on Chinas young semiconductor chip design industry is a huge challenge: to export-oriented electronics industry to reduce the impact by the market; in the capital under the influence of the crisis, coupled with NASDAQ-listed Chinese stocks, "failure" led to the performance of the capital of Chinas IC industry, "ignoring" some of the leading VC firms, "bad money" out; also designed the companys customers in China are mostly small companies, Under the influence of the economic crisis, the impact of small companies will undoubtedly be even greater. In October 2007, I predict 2008 is the fate of Chinas IC design industry, when the great controversy caused by the industry. Looking back in 2008, this view is undoubtedly correct. Experienced life and AD7801BRU datasheet and death years, then in 2009 it? Now I think that 2009 will be the turning point in the IC industry, the crisis brings opportunities to Chinese enterprises is far greater than the risk.

ISuppli forecasts the 2009 total output value of Chinas IC design industry, 41.59 billion dollars, $ 3,411,000,000 in 2008 grew by 21.93%, with the decline more than 10% of the global semiconductor industry, it seems hard to imagine, really "got a great view?" The answer is yes. Major motivating factor is:

One: domestic demand growth: a valid policy of stimulating domestic demand, Chinas domestic market growth, especially in small cities and AD7801BRU price and rural markets, and AD7801BRU suppliers and the pursuit of these markets, inexpensive, very sensitive to price. This will be the local design company to a gold entry points.

II: Domestic standard commercial: 2009 is the first year of the Chinese market standards. Star satellite broadcast standards last year to become Chinas first successful commercial standards, this will lead to more Chinese cities often the standard from the laboratory to include TD, CMMB, DTMB and ABS-S standard, including all will be in 2009 to the market or even large-scale commercial. Star market, especially in the satellite broadcast this year will be an explosive development, but also promote the development of the STB industry chain.

C: drive lipstick effect: the impact of the economic crisis, consumers will cover their wallets more tightly, but the lipstick effect of the recession will help Chinese companies to accelerate time to market share increase.

Four: launch of the GEM: Because the design of most of the enterprises are small enterprises, and there is no business model of fixed assets is difficult to make similar enterprises listed on the domestic A shares, which is so far, not a real IC design companies In the A-share listed reasons. However, the GEM will be introduced this year is the NASDAQ, but also conducive to more easily design companies listed, and encouraged Chinas "high-pass" and "Broadcom." With the previous capital industry caused by the Chinese concept of attention, this time it is thanks to the industry itself and new business models. Compared with the traditional industry, integrated circuit design enterprises with "three high" characteristics: high-tech (with the traditional A-share listed companies, such as Shanghai Belling and Hangzhou Silan, and now the leading design firms in terms of technology or product positioning comparable to international competitors already. such as Fuzhou Rockchip 65nm products already in mass production, which is the most global consumer electronics leader.); high gross profit margin (although the Chinese companies caught in a price war challenge However, a fabless business model because the industry is still mostly more than 30% gross margin, a number of outstanding companies and more than 50%); high growth rates (different to the traditional industry grew 10% to have a good different, chip design trades if the product once the business is successful, the annual revenue growth of 50% is very easy..) In this "three high" in the lead, there will be more and more investors concerned about the IC design industry, so most companies would "not bad money."

Five policies to promote: the "nuclear high base", special funds, and electronic information industry policy to stimulate the revitalization plan, and so, more and more chip design industry, electronics industry team investing unprecedented attention and concern. Meanwhile, the economic crisis, more and more overseas companies to acquire integrated circuit design enterprises, such as some time ago For acquisition of Freescales wireless division, Qiao Xings case.

Six: Re-chain innovation: to provide companies with the growing number of IP and design service companies have emerged, increasing the threshold of the IC industry is low, so there will be more and more non-semiconductor companies will enter the design industry. For example, some programs and agents, but also through their own product specifications provided by the chip design services company providing design, Foundry offers the new chip will effectively promote the industry chain development of the Chinese market.

Promoted in the above six factors, Chinas IC design industry in 2009 will usher in a revolutionary turning point in years. However, for this change, Chinese companies must also be changing the status quo. "Poverty is change, change the pass, General long time." So how should change it?

First: to seize the core: most Chinese fabless semiconductor company to do anything, including market analysis, product definition, algorithm and architecture, front-end and back-end design, promotion, sales and customer service. However, these companies also tend to only focus on one or two products. This approach is thankless, it increases the management costs, delayed response to market changes. In the digital consumer areas, the rapid response ratio is more important to obtain a large market share. Therefore, design should be entrusted to other companies in many business and other areas with high-tech manufacturers. By outsourcing non-core business to thin the road, this design can focus on their core business: product definition, front-end design and intellectual property (IP) accumulation and improvement. At the same time design services company can provide professional-quality tape service. Given the large number of products handled, they are assembled from contract manufacturers and vendors to get competitive prices. Fabless design service alliance is a win-win for both sides should cooperate, especially in the current economic crisis. And design services company, is a fabless companies to cut costs and focus on enhancing the core competitiveness of a better way. Some Chinese enterprises have already adopted this model in the clear progress. They retained the core of the product definition and market positioning, but no longer maintain the large number of design capacity. Instead, they form an alliance with the design services company, by outsourcing these tasks.

Second: seize the opportunity to market entry, the right time to do the right thing. Most Chinese companies to set up a short time scale than the school for these companies, and standards for participation in the emerging market competition is a very dangerous thing, because they do not have cash flow and do not have a technology monopoly of power. Now, at the time for a change. Chinese IC companies should choose to enter the market at the right time, and not rashly rushing to become the first competitor to enter the market. Such as the Internet market, the potential market, has now been reached on the eve of the market to take off, this time is a good time to enter.

In crisis, Chinas integrated circuit industry also needs to change, in the era of the PC to consumer electronics, the wave of the changing times, and hope to keep up with the wave of Chinese design company, to seize this golden opportunity to change win . We reaffirm Chinas IC industry will to succeed, but we know that success is never born, but must be earned. Only the fight to "the scenery here is fine."