Last year, China witnessed a significant investment growth in the semi-conductor field after the government issued encouraging policies to nurture the development of the industry.

The trend will probably keep going this year, but analysts warned warm-headed investors to pay more attention to technological development, rather than to be obsessed by the rosy market prospects.

"China's semi-conductor producers should keep up with the latest international technology to avoid wasting money on outmoded technology," said Xie Xiaoxia, a researcher with the Chinese Academy of Social Sciences (CASS).

Beijing and Shanghai recently announced that their billion dollar investment chip production bases would start making 8-inch 0.25-micron chips in 2002.

"The 8-inch 0.25-micron chips are already widely produced in other countries," said Xie, who worried the technology would be relatively outmoded next year by the time the two bases could produce such products.

"Local semi-conductor producers should keep their competitive edge and try to produce the most advanced products -- they should not always stay at the end of the profit list," the researcher said.

What China's semi-conductor sector needs most is advanced technology, not money, other business insiders agreed.

China has become one of the major semi-conductor importers in the international market in accordance with the country's rapid development in information technology.

Semi-conductor imports reached US$7.5 billion in 1999 and the number is estimated to have already surpassed US$10 billion in 2000.

Demand for chips keeps soaring in all intellectual equipment fields, such as computers, mobile phones and home appliances, but the major market share is still controlled by foreign companies led by Intel.

This is why China's information technology industry has for a long time been described as "heartless" and acts like a huge assembly factory.

"China will become the third largest chip market in the coming two years and number two within ten years," forecast George Scalise, president of Semiconductor Industry Association (SIA) of the US.

"Semi-conductor producers should keep close relationships with end-product makers like computer or mobile phone factories and produce the most needed products," the CASS researcher said.

Xie forecast that after two years' rapid development, the semi-conductor industry will slide this year.

But no matter how steep the slide, the semi-conductor sector as the core of information technology, should still be the country's top priority, the researcher said.

(China Daily 02/06/2001)