Semiconductors are on the move it seems! At least that’s what the voice of the US-based semiconductor industry association (SEMI) is telling us. They have hopped off to China and left the US. SEMI has just published a damning report that adds fuel to the fire (or at least that looks like making the current turn electric) as not only is China now the world’s leading producer of semi-conductors, but it also looks set to stay up there at the top of the roost. Why?
State of the Market
The trend has been reversed in both countries. Overall, Chinese manufacturing is on its way up… while the US is falling behind in production. Why the shift?
• China consumed fewer silicon ingots than North America back in 2008 (with an overall level that amounted to $3.57 billion for China compared to just under $5 billion for the US).
• Today, China is now consuming $5.07 billion-worth of semiconductors (and that’s a staggering rise of 42%). We are witnessing an overall upward trend in China.
• The US saw a slight fall in consumption, amounting to $250 million, meaning a fall to $4.74 billion.
In the space of just five years, China has managed to gain the competitive edge over the US and become the world’s leading semiconductor manufacturer.
Reasons
• The US semiconductor industry is going through a slump and it looks like it will just get worse.
• As time goes on, the fall in demand for semiconductors in the US is bringing about a slackening of business, which in a vicious circle spiraling out of control means that fewer and fewer companies are actually willing to invest in the US in that field.
• Semi-conductors are high-tech, money grabbing and expertise-driven. They need big money and high investment. The US is not providing that not only because it’s not getting the returns it needs, but also because it is suffering still from the effects of the global recession.
• China, on the other hand is not going through the same recession, or at least not to the extent that the US and Europe are. It posted a GDP-growth rate that expanded by 7.7% in the first quarter of 2013 alone.
There are fewer US factories that turn out semiconductors and it’s going to find it increasingly difficult to take the market back for the simple reason that it is now (and will probably remain) in the hands of a select (Chinese) few.
