China's integrated circuit industry will face "the toughest year in a decade" on falling demand for chips in the global market and an appreciating yuan, CCID Consulting said yesterday.

About 70 percent of the domestic industry revenue depends on exports but the global semiconductor market is expected to see a drop in revenue this year for the first time in eight years.

In 2008, China's industry revenue grew 5 percent year on year to 130 billion yuan (US$19.12 billion). In 2009, the revenue is forecast to grow only 4 percent, compared with a 25-percent jump in 2007, according to CCID, a research arm authorized by the Ministry of Industry and Information Technology.

"The global financial crisis has eroded consumer confidence and has curbed the demand for chips," said Li Ke, a semiconductor analyst at CCID, a Beijing-based research firm.

In 2009, personal computer sales will plunge 12 percent year on year as the slump continues in the economy, said Gartner Inc, a United States-based research firm.

The appreciation of the yuan also negatively influenced the domestic industry last year, and probably will continue to pressure it, Li added. Each 1-percent appreciation of the yuan will push down the revenue in the Chinese IC industry by 1.2 to 1.4 percent, according to CCID.

"It's a tough period for semiconductor manufacturing and it won't end shortly," said Richard Chang, chief executive of Semiconductor Manufacturing International Corp, the biggest semiconductor making firm in the Chinese mainland.

(Shanghai Daily March 4, 2009)