China study finds a thriving post-SARS electronics industry

The second annual edition of "Electronics Industry Outlook: China," was compiled by EE Times' Asian publishing partner, Global Sources, through their eMedia Asia Ltd. joint venture. Michael Liu, editor-at-large for EE Times China and EBN China is the principal author of the report.

The survey found that China's goal of becoming an electronics powerhouse remains on track despite last winter's SARS outbreak and a slumping global economy that hurt China's electronics exports. Electronics sales revenues continued to grow at a brisk pace last year, increasing 17.8 percent over the previous year to $169 billion, the report found.

Demand for foreign-made semiconductors remained strong. China imported $44 billion worth of components and ICs last year, while demand for parts like communications chips jumped 43 percent, the report said. Those chips were used in finished mobile handsets, phones and network equipment. Double-digit demand is expected again this year for telecommunications infrastructure equipment as the build-out of China's network extends to medium-sized cites across the country.

Continuing strong chip demand is also being driven by deployment of more mobile basestations and transmission equipment, the study reported.

Beijing's modernization drive has also spurred government and business purchases of PCs. As a result, domestic output of desktop PCs jumped 52.4 percent in 2002 to 14.6 million units.

Always strong consumer electronics sales soared again last year, the study found. For example, DVD players flew off the shelf at a 133-percent clip compared with sales for the previous year. The 2008 Beijing Olympics will be broadcast over China's digital broadcast network, further boosting demand for consumer ICs for TVs. At the same time, the cost-per-chip ratio for consumer electronics is expected to increase.

With entry to the World Trade Organization, China as been required to overhaul its legal system to improve intellectual property protections and lower trade barriers. So far, general tariffs have dropped by 3.3 percent to an average of 12 percent. "Ongoing changes in regulations and the consequent liberalization of trade have presented China with immediate benefits as well as challenges that present further business opportunities for overseas companies," Liu said.

A key change has been the lifting of restrictions on foreign ownership of local facilities. Multinational companies may now own 100 percent of these enterprises, which has spurred foreign investment in research and development along with new production facilities. Another recent study on Chinese R&D reported that about 200 joint R&D centers have been established in China since 1990.

Despite the continuing dynamism of the Chinese electronics markets, the report said problems remain. IP rights protections remain elusive, and ongoing violations continue to hamper China's software and electronics design industries, the study warned.

While companies operating in China have been granted import and export rights, the relative lack of China business experience in international trade and law leaves open the possibility of continuing trade disputes, Liu warned.

The China report, which also includes forecasts on demand, production and imports through 2006, is available in English and can be purchased directly from the EE Times Asia Web site for $495.