Chinese semiconductor business in deep decline

El Segundo (CA) – A survey from market research firm Isuppli said that its semiconductor industry, which showed signs of steep growth before the credit crunch, is now dangerously threatened.

The average capacity use in Chinese fabs has slumped to 43 percent, meaning that the factories are being hit by lack of demand, coupled with the costs of keeping them running.

Len Jelinek, a senior director at Isuppli, described China’s goal to be a dominant semiconductor manufacturing country is now in jeopardy. The reason for the slump, he added, is that global sales fell during a period when internal demand for chips fell too.

Although the capacity utilization rate is an abysmally low 43 percent, Jelinek said that the figure was set to rise to 54 percent in the fourth quarter of this year.

But it won’t be until 2012 and 2013 that it will reach the relatively healthy utilization rate of 84 percent and 85 percent respectively. Before then, Isuppli believes there will be a great deal of consolidation in the Chinese semiconductor space.