China will remain a major driving force of the semiconductor market in Asia Pacific region not including Japan, despite the country cutting its export tax rebate rates and the pressures on the revaluation of the renminbi, said Gartner Inc, one of the biggest information and telecommunications researchers.

"With the recovery of the global economy, the Chinese mainland, as one of the major electronics manufacturing bases in the world, will enjoy a stable growth in the industry; and retain its role as a locomotive for the development of Asia Pacific's semiconductor market," said Dorothy Lai, principal analyst with Gartner AP Semiconductor Group.

She said that although some semiconductor companies were troubled by the spread of SARS from April to June in the Chinese mainland, they had already recovered.

Lai predicted that the market in the Chinese mainland and Hong Kong would reach US$28.4 billion this year, a 23-per-cent growth over 2002.

Sales will grow at an average 18.6 per cent annually from 2002 to 2007 to US$54 billion in 2007.

However, Lai warned that the pressures on the appreciation of the renminbi - especially from the United States - might cause some difficulties for the exports of electronics products.

In addition, the recent change of export tax rebate policy is likely to add another difficulty to exports, as exporters will be eligible for fewer rebates, thus affecting their competitiveness.

"These two factors are worth our close attention, since the drop of electronic exports from China may also drag down the development of the whole region," said the Gartner analyst.

She estimated that the Asia Pacific market this year would grow by 18.5 per cent to US$68.2 billion.

The shift of more outsourcing contracts from international electronics companies to the region and the relocation of some semiconductor factories to the Asia Pacific region will be two major driving forces for this year's growth.

On the other hand, the Gartner researcher also pointed out that any global economic fluctuation brought by possible terrorist attacks in Southeast Asia, the failure to solve the North Korea nuclear crisis and the uncertainty of the Middle-East peace process would also influence the prospects of the semiconductor industry in the Asia Pacific region.

South Korea will maintain an average annual rate of 19 per cent from 2002 to 2007, the highest in the region, and the market will grow from last year's US$10 billion to US$23 billion in 2007.

Taiwan Province, a traditional semiconductor power in the region, is estimated to have an annual growth rate of 11.4 per cent from 2002 to 2007, expanding from US$9.9 billion to US$17 billion.

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