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China's Resilience: It's the economy…

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China is one of four featured geo-economies in Smith's most recent MarketWatch Quarterly There are so many obvious reasons to continue to monitor China, but for the semiconductor and electronics industries, China is particularly important because its increasing importance as a major consumer market. 

Yes, traditionally in the West, one thinks about China as an export heavy nation.  Based on that perspective, some analysts marvel at China's economic recovery.  It is important to note that while China was hit with negative numbers across the economic board, as almost every other nation, the underlying reason that China was able to rebound quickly and strongly is not due to strong exports.

How was China able to recover so quickly and sustainably, i.e., show resiliency in the face of global economic meltdowns?  As discussed in the Quarterly article, there are many reasons.  One important reason is the significant government stimulus packages aimed at the Chinese consumer and targeting China's most critical industries, semiconductors and electronics, in particular.  Herein lies the oft forgotten critical variable: the Chinese consumer.  The Chinese consumer has been and will increasingly be extremely important to China's GDP and to most major global industries (cf. also here for a broader Asian perspective).  China is not as heavy an export nation as many assume, and the Chinese consumer is responsible for roughly 33% of China's GDP today and set to expand to 50% over the next 5 years, according to The China Market Research Group.

With a current GDP for 3Q09 growing by 8.9%, and set to continue to rise, understanding the importance of the Chinese consumer is vital to business success.  As a result of the Chinese consumers' positive response to the government stimulus packages, the Chinese semiconductor market, while down 6.7% from 2008, is still almost 10% better than the global semiconductor market, as estimated by iSuppli.  Furthermore, the ability to curtail the economic fall through the stimulus packages, a "recovery in semiconductor demand [...] limited the decline in 2009 and set the stage for a return to double-digit percentage growth in 2010," according to Kevin Wang, Director, China research for iSuppli.

Of importance for the entire semiconductor and electronics industry is that China's resiliency is based on an increasingly active domestic consumer hungry for products across all markets, from automotive, personal electronics, white boxes, and mobile devices.  While there is variability in the 2009 rates of rebound among these sectors, the 2010 forecasts are all double digit.


Lisa Ann Cairns, Ph.D.
Written on Friday, 30 October 2009 00:00 by Lisa Ann Cairns, Ph.D.

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