08.12.2003 China's electronics manufacturing sees positive outlook towards 2005 and beyond
Representatives from foreign electronics manufacturers expressed that the outlook for China's electronics manufacturing industry is very positive for the next few years, and that China is also increasing its input in product R&D for the Asia Pacific region.
George Yang and Yang Fuyan, both senior executives with Siemens Dematic told Interfax that in China most local (electronics) firms are currently moving from low-end towards middle and high-end manufacturing. Siemens Dematic already provides around 3,000 SMT (Surface Mount Technology) machines to Chinese firms such as Haier, Konka, TCL, Bird, ZTE, Huawei, Eastcom and DBTel, as well as foreign firms such as Siemens Mobile, Motorola and Nokia. Between 2-4 SMT machines would be needed for the average mobile phone production line. According to Yang Fuyan machines come as a "manufacturing solution package," which cost in the region of USD 500,000, depending on client requirements. Siemens' SMT sales account for about 50% of the China market according to Yang, of which 95% are imported from overseas. Yang also identified a strong trend towards the increasing requirement in China for R&D investment to localize products to meet requirements for China and Asian markets.
The firm's competitors are foreign vendors such as Philips, Fuji and Panasonic. Yang revealed that firms such as Huawei and Datang are already preparing 3G handset manufacturing lines, using Siemens' SMT technologies. Yang predicted that the future trend is for smaller and smaller components, with increasing accuracy needed in the manufacturing process. With the challenge to manufacturers to produce products for technologies such as 3G and camera phones Yang said "the market is pushing us and we're leading the market We're creating smaller and smaller components."
Gu Ying Hao and Kelvin K.W Poon, both senior executives with Omron also expressed positive growth plans for China, in an interview with Interfax. Omron plans a USD 830 mln investment by 2005. Poon said that "China is really catching up," when comparing the country's electronics manufacturing capabilities to countries such as Japan. Poon predicts the trend for the next 3-5 years will also include the transfer to China of high-tech R&D, with the country possibly accounting for almost half of the world's capability before the end of the decade.
Omron is the leader in sensing technologies used by electronics manufacturers in China, and with the increasing sophistication of products being built in the country Poon sees growth for his firm being high, predicting a tripling of business volume by 2005. His firm deals with manufacturers who build PCs, laptops and other high tech goods - building brands such as Compaq, IBM, Dell, Foxcom, BenQ and Acer, among others.
Poon sees several factors for his very positive outlook on China -the WTO accession, tax benefits, low labor costs, an increasingly better infrastructure, low cost of local materials, and the growth of the market for high-tech goods within the country, as well as exports.
Poon sees the north of China, with its strength in car manufacturing, as being a hotbed of clients for the firm's electronic sensors used in automobile electronics, the south of China with its focus on labor intensive consumer product manufacturing similarly provides many clients, with East China having more of a R&D and high-tech focus. Poon said the firm has looked to the west of China to work on products for the fixed-line telecom industry at a later date.
Besides 3G Poon also sees environmentally friendly high-tech products a being a future trend.
American Tec, which is 15% owned by the Singapore government is a service equipment provider and distributor for OEM in China, representing a wide range of products including SMT makers and VI technologies.
According to Jimson Lee, the firm's general manager, local partners are crucial for foreign firms operating in the electronics business in China. He is talking to 2-3 SOEs (State Owned Enterprises) in Nanjing and Shanghai with a view to forming a joint venture, which he described as being in the 'multimillion dollar" range.
But setting up JVs in China with SOEs is not an easy process Lee told Interfax: "SOEs have learnt a lot of lessons, with difficulties such as debt, bankruptcies and uncertainties, it makes them conservative. As an outsider…we have to understand their concerns. We need to be very patient. But if they do not learn there is no way they can compete with the outside world," he said. Currently his firm's largest China facility is in the Suzhou Singapore high-tech park.
Lee hopes that this kind of cooperation between local firms and foreign firms will secure both strong local sales and exports of high tech goods. "We don't want to kill the bird and take all the eggs," Lee said. Currently 50% of his firm's revenue is from China.
The company representatives were present in Shanghai for a warm-up event for the NEPCON Shanghai 2004/ EMT China, to be held in the city in April 2004. Reed Exhibitions East China said the show is expected to draw a record 650 top manufacturing companies. Josephine Lee, general manager for Reed Exhibitions East China also told Interfax that her firm is very positive on the outlook for the electronics industry in China, and is also looking for investment opportunities in the region. Reed is looking to acquire a local firm she said.
According to a study by the International Finance Corporation (IFC), quoted by the show organizers, 16% of all electronics manufacturing takes place in developing nations, with China already accounting for half of that. By the end of 2005, China will be manufacturing an additional USD 46 bln worth of electronics gear, an increase of 135% over present production values, bringing in contracts at an estimated USD 80 bln.
