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China's integrated circuit market surpassed the United States and Japan in 2005 to rank No. 1 globally for the first time, according to IC Insights, a US-based semiconductor consulting firm.

The rising popularity of mobile phones and consumer electronics have boosted demand for chips in China, and the growth of digital TVs and next-generation phone applications will continue to fuel demand, analysts said.

China's IC market grew 32 percent to US$40.8 billion in 2005, much greater than the 8 percent growth rate for the IC industry worldwide.

The Chinese IC market is expected to reach US$124 billion by 2010, according to IC Insights.

In 2005, China represented 21 percent of the world's US$192.4 billion in IC consumption, up from 6 percent in 2000, the consulting firm said.

"Chips designed for mobility and multimedia will become the mainstream trends," said Yu Zhongyu, the China Semiconductor Industry Association's secretary general.

China's mobile phone user pool has now reached 380 million, ranking No.1 in the world. In addition, the country plans to issue third-generation licenses for mobile communications systems next year and broaden its digital TV programming within two years.

The size of China's IC market, however, may not necessarily mean that large amounts of production will surge into the mainland, according to Yu.

China-based IC production amounted to about US$2.6 billion in 2005 and is expected to rise to US$12.1 billion by 2010 — still only 10 percent of the forecast IC market on the mainland at that time, IC Insights said.

"As it moves to address the situation, the Chinese government will soon issue new support policies for the semiconductor sector, including fund raising, talent training and favorable taxes," said Li Ke, an analyst at Beijing-based CCID Consulting, a research firm under the Ministry of Information Industry.

(Shanghai Daily January 11, 2006)