Semiconductor sales growth on the mainland, the world's largest market, is expected to drop sharply this year, prompting a much-needed industry consolidation, analysts say.
After years of double-digit annual growth, mainland chip sales will rise 6.7 per cent to US$81.7 billion this year from US$76.6 billion last year, according to a new study from research firm iSuppli Corp.
Still, domestic sales would be the main income driver for mainland chipmakers amid falling demand overseas, it said.
'This growth in fabless [integrated circuit] revenue is being driven by domestic sales of wireless and consumer electronics products, rather than by exports,' said Vincent Gu, an iSuppli analyst.
Sales at local fabless integrated circuit makers - semiconductor firms that use foundries such as Semiconductor Manufacturing International Corp - are forecast to grow 12.3 per cent to US$3.5 billion this year, rising to US$4.1 billion next year and US$5.1 billion in 2010.
But consulting firm PricewaterhouseCoopers says most of the demand on the mainland is for exports. About 69 per cent of semiconductors consumed on the mainland last year were used in various electronic products for export, up from 64 per cent in 2005.
Global demand would slow to US$261.9 billion this year, a 2.5 per cent growth against 3.2 per cent last year, industry group World Semiconductor Trade Statistics said.
