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iSuppli: China’s electronic growth to continue in 2004
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http://www.digitimes.com/NewsShow/Article.asp?datePublish=2004/03/19&pages=PR&seq=201

"iSuppli anticipates that the subscriber base for popular PHS handsets will expand only moderately as local service providers place their heaviest bets on CDMA and the forthcoming issuance of 3G licenses."

By Joseph Abelson, iSuppli/Stanford Resources [Friday 19 March 2004]


As the first quarter of 2004 draws to a close, it is nearly certain that the spectacular growth of electronics manufacturing and semiconductor consumption experienced by China during 2003 will continue unabated through the balance of this year. Fueled by the relentless migration of manufacturing from higher-cost regions, the rapid expansion of China’s domestic consumer markets, and the steady march of Chinese-branded products onto the shelves of foreign retailers, the collective foot of this global production powerhouse is pressing as forcefully as ever on the accelerator pedal.

Examine virtually any end market application and you’ll find China’s 2004 outlook is up and to the right. China's production of electronic equipment is expected to rise to US$185.8 billion in 2004, up 11.1% from US$167.2 billion in 2003, as shown in the chart below. Production will increase to US$270 billion by 2007, iSuppli/Stanford Resources predicts.

PC production to hit 48 million units

iSuppli projects that China’s total production of PC hardware will top 48 million units during 2004, up 29% from 2003. To satisfy the surging worldwide demand for PCs, Taiwanese ODM makers are pushing increasing volumes through their China plants.

Although in the past, most PC produced in China were desktop models, the country will manufacture nearly equal volumes of both portable and desktop computers in 2004. From 2005 forward, laptops will represent an increasingly greater share of China’s total output.

TV production robust, but not yet digital

China, long a global production base for TVs, will build a total of 58.2 million sets during 2004, up 7.4 % from 2003, iSuppli predicts. China’s domestic market is expected to consume roughly 61% of the total output, with the remainder destined for export.

Traditional CRT TVs now account for nearly all of China’s production. However, the largest domestic makers are also investing heavily in flat-panel technology, especially LCD, in order to capitalize on the projected growth in global demand. With Beijing slow to commit to a standard for digital broadcasting, iSuppli believes that Chinese companies will produce only small quantities of digital sets during 2004.

China to increase share of global handset production

Of the estimated 570 million global handset shipments in 2004, iSuppli forecasts that China will produce 211 million, or 44 million more than it did during 2003. This will result in China commanding roughly 37% of global handset production in 2004. This outcome places the country on a trajectory to produce 45% of the global unit output by 2007, iSuppli predicts.

Domestically, China’s seemingly insatiable appetite for telecommunications will drive indigenous OEM makers to deliver an estimated 50 million units this year. iSuppli anticipates that the subscriber base for popular PHS handsets will expand only moderately as local service providers place their heaviest bets on CDMA and the forthcoming issuance of 3G licenses.

Broadband access, the next “killer application”?

According to China’s Ministry of Information Industry (MII), only 25% of the country’s estimated 72 million Internet users had broadband access at the end of 2003. iSuppli believes that both China Telecom and China Netcom will make sizable investments in DSLAM technology during 2004 to satisfy the rising consumer demand for bandwidth. Unit shipments of data communications equipments, like routers and switches, is expected to rise by 40% or more this year, while an expanding export market will fuel an estimated 10% growth in the production of central office equipment (COE) hardware, according to iSuppli.

Automotive electronics hit the highway

Strong domestic demand for automobiles, along with the migration of foreign automotive electronics manufacturing to China, are positioning this industry for dramatic growth through the balance of the decade. According to iSuppli, Chinese production of automotive electronics systems will grow nearly 40% this year and will attain a level of US$5.5 billion by 2007. From car stereos to antilock braking systems (ABS) to remote keyless entry systems, Chinese and foreign manufacturers are moving swiftly to establish the country as a major design and production base for a wide range of automotive applications.

So what does it mean?

The favorable outlook for China’s electronics industry encompasses nearly every application market and should therefore afford considerable opportunity to almost any company in the Chinese electronics supply chain, regardless of technology or end market strategy. As always, some will do better than others, largely on the basis of their capability to manage effectively in this highly dynamic and unpredictable environment.

The high rates of growth projected for China will subject all links in the supply chain to unprecedented levels of stress, a condition that will become particularly acute as lead times for certain components grow longer, as predicted by iSuppli. The best-performing companies will be those with the deepest understanding of their customers’ requirements, the most flexible planning systems and business processes and the discipline to maintain an intense focus on those few market opportunities that represent the greatest potential for revenues and profits growth.

For the companies that have these attributes, 2004 will be remembered as a very good year.

Joe Abelson is the director of emerging markets for iSuppli/Stanford Resources. Abelson is responsible for research and consulting regarding China and India.

China electronic equipment forecast (US$m)


2002
2003
2004
2005
2006
2007

China
143,446
167,163
185,842
207,500
238,794
270,050

Worldwide
962,264
1,001,539
1,081,443
1,146,809
1,205,776
1,280,026

China percentage of forecasted worldwide revenues
14.9%
16.7%
17.2%
18.1%
19.8%
21.1%


Source: iSuppli, compiled by DigiTimes, March 2004.