25 Jun 2009 11:57

China's rural electronics scheme boosts IC industry - analyst

Shanghai. June 25. INTERFAX-CHINA - The Chinese government's program to sell subsidized household appliances and consumer electronics to rural residents has significantly boosted domestic demand for integrated circuit (IC) products, an industry analyst said on June 24.

In 2008, China's IC suppliers generated average revenue of RMB 2.69 million ($393,488) per month from sales to manufacturers participating in the government program. However, the figure rose to RMB 9.02 million ($1.32 million) in the first quarter of this year, according to Song Yu, a senior industry analyst with CCID Consulting.

"From the program's beginning at the end of 2007 to April 30, 2009, household appliances and electronic products sold to rural markets under the program numbered 8 million units," Song said.

At the beginning of this year, Chinese Premier Wen Jiabao said that the Chinese government will increase its total subsidies of household appliances and electronic products sold in rural areas from RMB 9 billion ($1.32 billion) in 2008 to RMB 15 billion ($2.19 billion) in 2009. The policy will be maintained for the next five years, with the aim of generating additional revenue of RMB 500 billion ($73.14 billion) from rural sales of household appliances and electronic products over the period.

"Although revenues from the government's rural sales program make up just a small proportion of the overall revenues of IC manufacturers, the rural market will become more important to IC companies over the next five years," Song said.

According to Song, IC suppliers should work more closely with household appliance and consumer electronics manufacturers to produce low and middle-end products to seize the opportunities offered by the rural market.