National Semiconductor Says China Growth to Double
National Semiconductor Corp., whose chips boost cell phones' battery life, aims to double sales growth to 20 percent in China.
Jan. 16 (Bloomberg) -- National Semiconductor Corp., whose chips boost cell phones' battery life, aims to double sales growth to 20 percent in China this year as more people buy mobiles.
The target is almost double the industry average growth rate in China for analog chips, which also help power notebook PCs, Elan Lee, National Semiconductor's China general manager, said in a Jan. 13 interview. The Santa Clara, California-based company's 2005 China revenue rose by ``more than 10 percent,'' he said.
National Semiconductor and rivals Texas Instruments Inc. and Agilent Technologies Inc. are cutting jobs at home and expanding in China to tap lower labor costs and rising demand. The government estimates China had 388 million cell-phone users at the end of November, 17.5 percent more than a year earlier.
``National benefited not only from lower labor costs but also because it is now closer to where many of the world's mobile phones are made these days, and that is China,'' said Duncan Clark, managing director of BDA China Ltd., a Beijing-based technology research company. ``Roughly half of the world's research and development, and production of the world's handsets, are in China these days.''
The company's emphasis on higher-priced analog chips has improved profit margins, Chairman and Chief Executive Brian Halla said Sept. 30.
National Semiconductor increased its quarterly dividend by 50 percent in the fiscal second quarter because of rising profit. The company paid a 3 cent dividend on Jan. 9. It declared its first quarterly dividend of 2 cents a share in October 2004, joining other technology companies that increased payouts after the U.S. cut taxes on dividends in 2003.
Halla said in September that industry inventories are low, unlike in 2004. The margins ``are up, the operating expenses are down,'' Halla said.
National Semiconductor is a leading producer of analog chips that are used for power management and decoding and encoding sound, such as music tones, in mobile phones.
China's analog chips sales are expected to rise to more than $10 billion this year, up from under $10 billion in 2005, and as high as $30 billion by 2010, according to a National Semiconductor slide presentation.
China overtook the U.S. and Japan to become the world's No. 1 market for chips in 2005, according to U.S.-based semiconductor market research company IC Insights.
``China continues to be a growth engine in our group,'' Lee said. The company employs 800 people in the nation, compared with 500 last year, he said. The majority of the workers are based at the Suzhou factory, which serves customers including Samsung Electronics Inc., Huawei Technologies Inc. and Haier Group.
Last year the chipmaker fired 550 workers in factories worldwide, except in China. The nation controls 20 percent of the world's chip market, which is worth $175.4 billion, according to IC Insights.
The Chinese government has been trying to target semiconductor industry growth by offering tax rebates and other incentives, said Edward Yu, chief executive of Beijing-based technology market research firm Analysys International.
``The main reason China's semiconductor market is growing so quickly is because China's consumer electronics market is very big and growing bigger,'' Yu said. ``Demand for high-valued added chips like National's continue to be high. We don't forecast an industry slowdown, especially in the higher value-added chips, for some years to come.''
Demand for semiconductors is growing in China as companies move production of cell phones, televisions and other devices to the nation. The country's mobile-phone market, the world's biggest by users, may issue third-generation licenses this year, raising demand for chips used in new equipment and handsets.
``We plan to double our sales in China every three years,'' Lee said.
National Semiconductor's factory in Suzhou, eastern China, produces 2 million chips a day, double the number it made a year earlier, Lee said.
He declined to provide figures for the company's sales in China or say whether it plans to add more employees. Asia Pacific accounts for about 47 percent of National Semiconductor's $1.9 billion in annual sales, with China contributing a ``significant portion'' of that, he said.
Growing demand in China and Asia Pacific contrasts with an industry slowdown elsewhere. National Semiconductor said last year it would cut jobs at plants in the U.S., U.K., Singapore and Malaysia because of ``flat'' demand for silicon wafers in the current quarter. Larger chipmakers including Intel Corp., the market leader, slowed production last year to pare excess inventory.
National Semiconductor's shares fell 77 cents, or 2.7 percent, to $27.47 on Jan. 13. They have risen 64 percent in the past year.
The Chinese government has said it may issue 3G licenses in 2006, which is expected to spur billions of dollars of network spending by companies such as China Mobile (Hong Kong) Ltd., the world's biggest wireless company by users.
``Our technology is a key component in all 3G equipment,'' said Lee. National Semiconductor counts the world's top six mobile-phone makers including Nokia Oyj, Motorola Inc. and Samsung among its biggest customers.
``There are so many opportunities for growth in China -- it just doesn't stop.'' said National Semiconductor's Lee. `` Every year, there are more than 30 million TV sets sold, 20 million DVD players sold and 20 million home entertainment centers sold. Even if sales were to slow down in mobile phones, they'll be made up elsewhere.''