"The problem is not China versus the world, rather than semiconductor foundry versus independent device manufacturer (IDM)," said Dorothy Lai, a senior analyst of the Asia-Pacific semiconductor group with the US-based research company Gartner.

According to the 10th Five-Year Plan (2001-05), the country will build about 10 new semiconductor lines by 2005.

Lai pointed out in an interview yesterday in Beijing that in the future, many international companies would outsource low-end products to fabrication plants (fabs) in China and they will focus on high-end products like 0.09 or 0.13-micron lines.

Lai said last year's Document No 18 issued by the Chinese Government, which encouraged the development of software and semiconductor industries with low tax rates and other preferentials, had become one of the most important factors for the growth of the country's semiconductor industry and the formation of a complete supply chain from integrated circuit design, wafer production to packaging.

She predicted that China's demand for semiconductors would reach US$10.9 billion this year, but the local product can only fill 5.3 percent of the demand, with revenues of US$600 million.

Next year, the demand for semiconductors in China will grow to US$12.5 billion.

"In the coming few years, the ratio of local production will be higher with the start of the operations of many new fabs," said Lai .

According to the information and communications technology (ICT) market research released last week, the world semiconductor industry will be almost level with last year, with a growth rate of 0.5 percent to US$153.3 billion.

"We believe that next year will be a peak transition year," said Lai.

She pointed out that the replacement of computers by companies and the increase of mobile telephone shipments would be two major factors in a modest 11 percent growth next year.

(China Daily November 7, 2002)