BEIJING--(BUSINESS WIRE)--On January 28, 2011, the General Office of China’s State Council issued several incentive policies, continuing to provide strong supports for the integrated circuit (IC) industry in finance & taxation, investment & financing, R&D and import & export and further specifying the investment & financing policies. Driven by the new policies, China’s IC enterprises will enter the next round of rapid development and achieve win-win results in the capital market by fully integrating resources in ways of investment, financing and acquisition.
Figure 1 Sales Revenue and Growth Rate of China's IC Industry from 2007
to 2011
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Source:
CCID Consulting, February 2012
Three clusters have formed, with core cities fueling the industry’s development.
In recent years, China's IC industry has witnessed an intensive growth in areas of the Yangtze River Delta, the Bohai Rim Area and the Pearl River Delta. In the Yangtze River Delta where domestic packaging and testing enterprises are most intensively located, the sales revenue of the IC industry reached RMB 97.843 billion in 2011, accounting for 67.9% of the country’s total.
Figure 2 Regional Distribution of China’s IC Industry Revenue in 2011
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Source:
CCID Consulting, March 2012
IC enterprises in Shanghai are more favored by VC/PE investment institutions.
From 2010 to 2011, 12 equity financing cases involving China's IC enterprises were disclosed, and the disclosed amount reached RMB 3.287 billion, with an average financing amount of RMB 365 million per case, above the average level of RMB 252 million from 2001 to 2009.
Figure 3 Distribution of VC/PE Equity Financing for China’s IC
Enterprises from 2010 to 2011
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Source:
CCID Consulting, March 2012
Both domestic and foreign capital markets boost the IPO of the IC industry, with a focus on IC design.
Among China’s IC enterprises that launched IPO from 2010 to 2011 were five chip design enterprises, one chip manufacturing enterprise and two enterprises supporting chip design. In recent years, with the rapid growth of the domestic market, the Chinese government has given full play to its policy guidance function to foster and encourage IC enterprises to become bigger and stronger. Thereby a group of competitive enterprises have emerged. National Technologies listed on Shenzhen Growth Enterprise Market raised as much as RMB 2.380 billion through its IPO, reflecting the high expectation of the capital market on China's IC design enterprises.
Figure 4 Distribution of IPO Financing of China’s IC Enterprises from
2010 to 2011
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Source:
CCID Consulting, March 2012
IC design enterprises are major players in M&A and are supported by government policies to become bigger and stronger.
From 2010 to 2011, the enterprises involved in IC enterprise M&A cases were mainly chip design enterprises, which represented 81.82% of the buyers and 45.45% of the sellers. Horizontal mergers of IC enterprises were most frequently seen, for the purpose of reinforcing technology extension and market control ability. The launch of China GEM was instrumental for SMEs to bolster their operating fund. Nevertheless, most domestic IC enterprises are still short of fund, especially in the market competition with multinational enterprises.
Figure 5 Distribution of Mergers of China’s IC Enterprises from 2010 to
2011
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Source:
CCID Consulting, March 2012
The driving force of the vigorous development of China's IC industry comes from the constant improvement and optimization of the industrial environment. Encouraged by the policies and markets, China's IC industry is seeing frequent capital operations of IPO, private equity financing and acquisition, which are playing an important role in boosting the industry’s development.
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CCID Consulting Co., Ltd., the
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