Global semiconductor market grows to $354 billion, China leads the way

26 January 2017 Consultancy.uk

The global consumption of semiconductors continues has grown to $354 billion last year, lifted by the accelerating rise of technology and trends such as the Internet of Things. China leads the way in terms of consumption and growth rates.

The Chinese semiconductor industry has continued to grow apace, on the back of strong growth to its manufacturing market. In a new report from PwC, the accounting and consulting firm explores key market conditions for the semiconductor market in China.

Chinese consumption market share continues to rise

The global semiconductor market is found to be worth $354 billion in 2016, up almost $30 billion from the year previous. China continues to be by far the largest consumer of semiconductors, totalling almost 60% of global market share. America comes in second, at around 12%, while Europe and Japan consume 6% and 5.5% respectively.

The past ten years has seen the Chinese Semiconductor market grow by CAGR of 14.3%, taking it ahead of Japan as the world’s largest consumer in 2006. In recent years growth has slowed somewhat – in 2015 the market grew by a more modest 5.9%. The European market, however, saw a considerable contraction of share, from 9.4% the previous year, while the Americas saw their share tick up slightly.

Chinese consumption growth

The Chinese consumption of semiconductors exploded in the early 2000s as semiconductor heavy manufacturing took off in the country, among others, from the boom in smartphones and tablets. The market continues to see strong growth on the back of continued movement of manufacturing to her shores, as well as the above average number of semiconductors used in the countries' manufacturing process.

Gartner reports that in 2017 that share of electronic equipment as a % of total manufacturing in China will hit 38%; with on average considerably higher levels of semiconductors used in the equipment.

Chinese semiconductor market growth

While semiconductor consumption in China has seen more modest growth in recent years, the semiconductor industry in China itself continues to enjoy explosive growth, up 15.5% in 2015, following an increase of 17.5% the year previous. The growth base remains relatively small, at $89.5 billion – reflecting the relative nascent of the industry.

The continued high internal demand for semiconductors, and its recent growth, continues to spur growth in the segment. The Chinese market capacity has increased to become globally significant, increasing in global market share from 11.6% in 2012 to 16.2% in 2015.

Chinese wafer capacity continues to grow

In terms of 8-inch equivalent wafer production potential, Chinese capacity has hit around 12.7% of global capacity, up from 7.4% ten years earlier. The Chinese mix of wafer components differs considerably however; in some segments, such as O-S-D and Foundry/Dedicated, the country holds 35% and 37% of worldwide capacity respectively; in other segments, such as R&D/MEMS and N/A & EPI, the country produces nothing.

Raman Chitkara, Global Technology Industry Leader at PwC, says, “For China’s semiconductor industry, all signs point to continued moderate but sustainable growth over the next few years. Government incentives and market conditions should continue to benefit the now-mature industry, leading to long-range moderate growth and a further narrowing of the consumption/production gap.”

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