APAC chip revenue to grow amid global slump

India to see fastest growth rate among markets in Asia-Pacific region which is expected to see single-digit growth even as global revenues dip in 2011, Gartner reveals.

SINGAPORE--The Asia-Pacific semiconductor market will see expanding revenues this year, though its growth rate will be a modest "single digit", amid a dismal global climate which will register negative growth, according to Gartner.

During the research firm's annual semiconductor conference here Monday, Phillip Koh, research vice president for Gartner, noted that while the worldwide semiconductor market would contract in 2011, the Asia-Pacific region was expected to grow at 2.3 percent to reach US$183.6 billion by year-end.

In contrast, revenue for the global market is set to dip.

According to Gartner's worldwide semiconductor research vice president and group forecast director, Bryan Lewis, the total market would shrink by 0.1 percent in 2011 and reach revenues of US$299.1 billion.

Asia-Pacific was also expected to grow in the long term. Koh reported that the compound annual growth rate (CAGR) for semiconductor in the region, spanning 2010 to 2015, was projected to clock at 6.9 percent.

Asia-Pacific currently makes up 60 percent of the global semiconductor market and this figure is expected to grow to 66 percent by 2015, he added.

India to be region's fastest grower
While China would retain its leading share of the region's semiconductor market, Koh highlighted that there were growth opportunities in India as well as emerging markets in Southeast Asia which would see high CAGR over the five-year period.

China's semiconductor revenues in 2011 would reach US$119.7 billion, making up 65 percent of the regional market, predicted Gartner. Growing at a CAGR of 7.6 percent, by 2015, revenues in the Chinese market would reach US$167.4 billion to make up 67 percent of the Asia-Pacific market, said Koh.

In comparison, India's semiconductor revenues would reach US$7.7 billion this year to account for 4.2 percent of the regional market. The country was expected to register a CAGR of 14.4 percent to hit revenues of US$13.6 billion in 2015, accounting for 5.4 percent of the region's market, he noted.

Koh attributed India's high growth to three key factors: growing domestic demand for electronic equipment; national policies that encourage electronic manufacturing; and the government's plans to revamp the country's electronics production policy this year.

The Gartner analyst highlighted the low penetration rate of electronic equipment in India's rural regions, which he said "creates significant potential for semiconductor vendors". The country was also seeing growth in the middle and higher income groups which would encompass consumers who were able to purchase higher end devices such as LCD TV, smartphones and set top boxes, he added.

The other factor driving India's growth was the government's efforts to drive electronic manufacturing in the country, which included promotion schemes such as the Electronics Hardware Technology Park (EHTP) Scheme, Special Economic Zones, and customs duty exemptions.

The Indian government's electronic production policy which, Koh said, would "hopefully be announced in October" would also help boost its capabilities in IC design, IC fabrication as well as design and manufacturing of electronic products. This would aid the local electronics manufacturing industry to flourish and create employment opportunities to make India a manufacturing hub, he added.

Despite the high CAGR projected for the country's semiconductor market, Koh pointed out that a large percentage of the market accounted for only "a few key electronic devices". Mobile phones, desktop PCs, mobile PCs, LCD TVs and set-top boxes accounted for about 75 percent of India's semiconductor market, he said.

He also pointed to emerging markets in the Southeast Asia such as Thailand, Indonesia, the Philippines and Vietnam as fast-growing markets. These markets would see a CAGR of 7.3 percent to hit revenues of US$19.2 billion in 2011, and US$26.3 billion in 2015.

Tablets fastest growing segment
Ben Lee, principal analyst at Gartner, also shared that the media tablet category would be the fastest growing segment, growing at a CAGR of 57.8 percent, followed by solid state drives at 40 percent.

However, revenues contributed by media tablets would still be lower than mobile PCs, smartphones and desktop PC over the forecasted period, said Lee.

He also pointed out that while sales of media tablets seemed "aggressive", by 2015, the market would only account for less than half of similarly priced smartphones. Media tablet shipments were expected to reach some 300,000 units while the "premium communication devices" would see shipments of about 800,000 units during the same period, he noted.

Battle to take place in software
According to Lee, while chip vendors Intel and ARM would continue to battle it out for the media tablet and smartphone markets, the ultimate winner would be decided by which the operating system running on the device. Currently, ARM has a close relationship with Google's Android, while Intel is close to Microsoft, he explained. However, both semiconductor players now have "emerging" relationships with the different software vendors, too, he said.

Ultimately, the processor that "supports the stronger ecosystem will be favored by the OEMs (original equipment manufacturers)", he said.

He also advised tablets vendor to focus on the application and ecosystem of the devices, rather than focusing on the hardware capabilities of their products.


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