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TECHNOLOGY INDUSTRIES IN CHINA

1. TECHNOLOGY INDUSTRIES IN CHINA 

2. Retooling for Higher Value Products in China 

3. Information Technology Goods in China 

4. Electronics Industries in China 

5. Chinese Electronic Companies 

6. Hisesnse 

7. Changhong Electric Co. 

8. Foreign High Tech Companies in China 

9. Lenovo 

10.Lenovo and IBM 

11.Lenovo After the IBM Deal 

12.Chinese Chips 

13.Chip Makers in China 

14.Haier 

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TECHNOLOGY INDUSTRIES IN CHINA

Microsope factory in China High tech companies accounts for less than 2 percent of the Chineseeconomy, but their stake is getting bigger. Chinese technology firms are attempting to make the

leap from user and copiers if advanced technology to being creators and designers. By 2010 theChinese government wants to have 10 technology companies with exports of more than $5billion and has offered gnerous tax breaks and other incentives to attract investment.

As of 2008, about 89 percent China’s high-tech exports came from non-Chinese-ownedcompanies.

A number of chip makers and high-tech firms are setting up shop in the Shanghai and Beijingareas. Zhongguancun, in the Haidian districts in northwest Beijing, is sometimes called theSilicon Valley of China. It is the home of many Internet and computer firms as well as 40universities and 138 scientific institutions and many of China’s 810,000 research scientists andengineers. Microsoft has a major research facility here.

The electronic market is very competitive and profits margins are slim. The price of televisions,for example, dropped one fifth every year between 1996 and 2000. In addition most of the profitsmade electronic items made in China for foreign companies end up outside of China, mostly withthe foreign companies and retailers. Of the $280 manufacturing costs for the Apple iPhone, for example, which is assembled in China under the guidance of of the Taiwanese company HonHai, less than five percent actually stays in China.

China has the ability to quickly mobilize resources funded by rapid economic growth It isstronger in hardware development than software innovation and is better in quantity developmentthan quality. It is expected to produce low-end products over the coming years that coulddramatically change markets in communications, energy and transport. But even with foreigncompanies maintaining a large presence China is not expected to produce quality high-techproducts until 2015.

Manufacturing sophistication is rising all the time. China is no longer just a producer of toys,textiles and shows. It has made the leap into high-end manufacturing. Telecommunicationscompanies make electronic switches that route phones calls and Internet traffic throughtelecommunications networks. There are also factories that make car engines, food pressingmachinery and air conditioners.

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China has the most advanced biotech program after the United States. It has 20,000 peopleemployed at 200 labs devoted to biotech research and spends about $300 million a year on it.

The Asus Factory in Suzhoum near Shanghai, which makes laptops and desk tops is for Delland cell phones an other electronic products, is a square kilometer in area.

Good Websites and Sources: China Tech News.com chinatechnews.com ; China Solar Net

shinesolar.net ; Suntech suntech-power.com ; Solar and Alternative Energy Products made-in-china.com ; Articles on Renewable Energy in China martinot.info ; New York Times Article onChina’s Leadership in Clean Energies nytimes.com ; Industry: China-Made Products made-in-china.com ; U.S. Commerce Department Information by Industry for China buyusa.gov/china ;Wikipedia article on Industries of China Wikipedia ; U.S. Commerce Department’s Office of China Economic Area (OCEA) export.gov/china Links in this Website: ; AUTOMOBILEINDUSTRY IN CHINA Factsanddetails.com/China ; FOREIGN CAR COMPANIES IN CHINAFactsanddetails.com/China ; PIRATING AND COUNTERFEITING IN CHINA

Factsanddetails.com/China ; See Dalian in LIAONING PROVINCE Factsanddetails.com/China ;SHENZHEN AND THE PEARL RIVER DELTA Factsanddetails.com/China ; ZHEJIANGPROVINCE Factsanddetails.com/China ; SHANGHAI Factsanddetails.com/China ; SCIENCEIN CHINA Factsanddetails.com/China ; CHINESE SPACE PROGRAMFactsanddetails.com/China ; See Engineers, Labor 

Retooling for Higher Value Products in China

In recent years many factories have started training their work forces, investing in sophisticatedmachinery and retooling their factories to make higher-value products. Some companies feelthey have no choice but to follow this trend as the rising costs of labor and materials and lowselling prices have made it hard to make money in cheap-labor industries. Ground zero for this

trend is in Shenzhen and Dongguan, former cheap-labor factory centers.BYD, a Shenzhen-based company that became the world’s second largest battery maker in less

than a decade, is even more ambitious. It has built a 1.6-million-square-foot assembly plant andhas hired Italian-trained car designers to make plug-in hybrid cars. Hasee is a computer maker that was founded in 2002 and is already producing 100,000 laptops a month. By pouring itresources into research, focusing on innovative computers such as laptops that sell for less than$370 it hopes to be the world’s largest computer maker by 2020.

Chinese companies are expanding into software, biotechnology, medical devices andsupercomputers. They are developing a passenger jet, several models of automobiles andopening up sophisticated chip plants as Japan and South Korea did before. Andy Rothman, alongtime China analyst, told the New York Times, “When a country is in its early stages of development, as China was 20 years ago, having an export processing center is good for growth.But there’s a point when that’s no longer appropriate. Now China’s saying, ‘We don’t want to bethe world’s sweatshop for junk any more.’”

Factors pushing China’s drive to produce more sophisticated products include the rising valueof the yuan, the high cost of labor, labor shortages, new labor laws that mandate overtime andseverance pay, the movement of workers to factories in the interior, high fuel and material costs,higher shipping costs, criticism over shoddy products and safety, efforts to clean up the

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environmentall of which make it hard to make money off cheap products and thus pushescompanies to modernize and become more productive and efficient.

In its favor China possesses an array of ambitious entrepreneurs, fiercely competitive domesticmarkets and hundreds of thousands of highly trained engineers. The government is driving theprocess forward by tightening pollution regulations and encouraging companies to invest in

expensive new machinery, often providing the money from state-owned banks to finance suchupgrades. Beijing is discouraging the establishment of cheap-labor factories in southern China byending tax breaks there.

Information Technology Goods in China

In 2004, China overtook the United States as world’s biggest supplier of information technologygoods. A report by the OECD showed that China’s exports of information and communicationtechnologyincluding laptop computers, cell phones and digital cameraincreased by more 46percent to $180 billion in 2004 from the pervious year. By contrast the U.S. exported $149billion, a 12 percent increase from 2003.

China produces m more laptop computers, computer parts, cell phones and other communications goods than the United States or any other country. It produces three out of everyfour photocopiers in the world and two thirds of the watches. Technology exports such as cellphones and computers account for 27 percent of China’s exports.

China is trying to impose its own technology standard on a range of consumer products,including cell phones, personal commuters digital cameras and wireless networking. Someanalyst feel that China could have reached its position of dominance in certain technologysectors much faster were it not hindered by restrictions on dual-use technologies that havecivilian uses and military applications.

China is not expected to be a major innovator in high tech fields any time soon. It is primarily

an assembler of technology products and is dependent on imported advanced chips to make theproducts is does Less than 0.03 percent of Chinese firms own the intellectual property rights for the key technology in the products it produces. Only 0.56 percent of sales from technologyproducts goes into R & D.

At China becomes dominant in information technology fields some worry ability to copy thelatest technology advances made outside China and put secret devices in the products itproduces.

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Electronics Industries in China

Electronics industry worker China is world's third largest producer of electronics. Chinese

companies make computers, scanners, computer disks and silicon chips. As of 2005, Chinaproduced two thirds of the world’s television sets and DVD players and other electronic gadgets.

China expected to produce 98 million desktop and laptop computers in 2006, with of most themproduced for export. Chinese producers are also making stuff for buyers at home. Between 1994and 2000, the share of domestic television makers rose from 30 percent to more than 80 percent.In 2000, Chinese companies produced 43 million televisions.

Chinese production strategies have changed the way the electronics industry operates. Wolf Corrigan of the consulting group LSI Logistics, told the New York Times: “Typically a newtechnology will be released at $1,000 in Japan and it would take two years to drop below $1,000and make it to the U.S. and Europe and take a total of five to seven years to reach the mass

market. As features were added, prices rose. Now China’s low labor costs and the vastness of itpopulation are combining to bring bargain electronics into homes in record time. Chinesecompanies build sophisticated goods with components produced locally and rush them by themillions into the huge domestic market. New companies arrive. Competition shrinks the times ittake for new products to appears, new features are added while prices are likely to drop Anythingto pump up sales.”

See Television, Arts, Media, Sports

E-Business and the Internet, See Arts, Media, Sports

Computers and Software, See Arts, Media, Sports

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Chinese Electronic Companies

Television factory in the 1980s TCL has been called the Chinese Sony. The largest publically

traded electronic maker in China, it combined with Thomson to make televisions and DVDmachines and become the world’s largest television maker, producing 20 million televisions ayear. TCL bought German television maker Schneider Electronics AG in 2002 and makeshandsets with Alcatel SA. See Communications.

BOE Technology is a major monitor and computer screen maker. In 2003, it became a globalcompetitor after purchasing the display business of South Korea’s troubled Hynixsemiconductors for $38 million. .

Huawei technologies is China’s largest phone equipment maker. Based in Shenzhen, it hadoverseas sales of $2.2 billion in 2004. It hoped to raise that figure to $4 billion in 2005. Its mainrivals are Cisco and Ericsson. It has won business away from Cisco by developing switches androuters at lower prices.

Huawei and its rival Chinese ZTE, another telecommunications equipment also based inShenzhen, have had great success selling telecommunications equipment in the developingworld. In Nigeria, for example, they were able to take 50 percent of cell phone market between2003 and 2007 by offering handsets that were as much as 40 percent cheaper than those sold bycompanies like Ericsson and Alcatel-Lucent. Huawei has also been awarded contacts inColombia, Venezuela, Uruguay, Russia, Vietnam, Pakistan, Indonesia, Bangladesh, Morocco,Tajikistan, and Saudi Arabia, ZTE is very active in India and also has contracts in Lesotho andGhana.

Semiconductor Manufacturing International is China’s largest supplier of made-to-order chips.It is on course to become the world’s third largest maker of made-to-order chip despite being

ordered to pay $175 million to a Taiwanese chip make in a patent dispute.

Other large electronics manufacturers include Xiamen Republic Electronic Co., a maker of DVD players, Konka which makes televisions that are sold in the United States.; Great Wall, alocal computer brand..

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Hisesnse

Hisesnse is a television maker with global ambitions. Largely owned by the Chinesegovernment, it hopes to increase profits and sales by increasing the scale of production to getbetter deals on raw materials and establish a brand which consumers would pay high prices toget. Among its achievement have been setting up a factory in Hungary in a matter of months to

supply the European market. It also has factories in South Africa, Algeria, Iran and Pakistan.

Hinsense began as the Qingdai City Number Two Radio factory in 1969 as a manufacturer of AM radios with 30 employees who task at that time was to deliver the message of class struggleduring the Cultural Revolution. A year later it made its first black and white television . By 1970it was producing 6,000 televisions a year. In 1989 ut changed its name to Qindao Hisense Group.In 1997 shares were sold on the Shanghai Stock exchange. In 2004, it employed 10,000 peopleand had annual sales of $2.75 billion.

At the Hisense factory in Qingdao, workers who are paid $100 a month assemble flat paneltelevisions with screens up to 50 inches under a digital display that records how many televisionsthey make and how many they need to make to reach that day’s goal.

Changhong Electric Co.

Sichuan Changhong Electric Co. is China’s No. 1 television exporter and No. 2 televisionmaker. It began as a company that produced radars for the People’s Liberation Army. In 1997 itwas the world’s 7th largest television producer. At that time it produced 6 million television setsa year. Their plant at Mianyan in Sichuan alone produces 3,400 television sets a day on 17assembly lines manned by workers who wear matching blue uniforms and are encouraged to readChinese classics.

Changhong televisions are sold under the Apex name in the United States and are available inWal-Marts. In December 2004, Changhong announced losses of almost $500 billion, because of 

declining sales in the United States, accusations of dumping and the failure of ones it largestcustomer to pay money it owed.

Foreign High Tech Companies in China

Foreign high tech companies are attracted to China by highly skilled, low wage engineers andcomputer programmers as well as low-cost labor. Microsoft employs engineers that takequestions from customers in the United States, South Korea, India and Thailand. Intel, IBM,Oracle, Microsoft and Siemens all have all research facilities n in China. Applied Material, Inteland Hewlett-Packard have set up high tech factories in China. In the city of Wuxi factorycompounds with schools, playground and its own power plant makes disk drives and devicescalled optocouplers in dust-free rooms.

Intel has semi-conductor plant and a state-of-the-art facility with 1,000 researchers in Shanghaiand has $375 million assembling plant in Chengdu. first manufacturing plant in Asia. InSeptember 2007 ground was broken on a $2.5 billion Intel chip factory in Dalian. It is Intel’sfirst manufacturing plant in Asia and represent one of the biggest single investments in China.The plant is slated to open in 2010, and employ 1,200 people.

Cisco, the world’s largest maker of networking equipment, had invested $8.5 billion in China asof 2007 and was planned to spend a total of $16 billion by 2012. The company sells equipment

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for phone and high-speed wireless services and has stakes in Alibaba.com and Harrier, two of China’s best-known companies. See Internet

Chinese companies make computers for IBM, Dell, Hewlett Packard and other Dell purchased$18 billion worth of computer components from China in 2006, up from $15.7 billion in 2005.

Dell is the largest foreign compute make in China with 10 percent of the market. In September 2007, Del announced that it had made a deal with Gome to sell its computers in their stores. Dellhas introduced a low-price computer geared specifiable for rural Chinese.

Chinese companies make cell phones for Motorola, which are sold in China and around theglobe. Motorola tripled its outlets to 30,000 in 18 months in the mid 2000s.

In August 2007, a Chinese technology company initiated an effort to buy of only two disk makers left in the United States Seagate and Western Digital.. Some American governmentofficials objected to the move on national security grounds.

Matsushita, See Japan

Lenovo

Lenovo is China’s largest computer maker and the forth largest computer company in the worldbehind Dell and Hewlett Packard. It is sells one third of the branded computers sold in China andmake computers and computer parts for a number of foreign companies. It was valued at $15billion in 2007.

Formally known as Legend, Lenovo is based in Beijing, listed on the Hong Kong Stock exchange and valued at $13 billion. Partly owned by the Chinese government, it was founded inBeijing in 1984 by researchers with $25,000 from a science academy and got its start as adistributor for personal computers for IBM, Hewlett Packard and the Taiwanese PC maker ASTin China. In 1997 it surpassed IBM to become the largest seller of personal computers in China.

It had $3 billion in sales in 2003, selling PC for as little as $360 and having a large share of salesin the government and in schools. That year 89 percent of its revenues came from China.

The CEO of Lenovo is Lui Chuanzhi, a former government scientist who spent three years at alabor camp during the Cultural Revolution and founded the business with a $24,000 loan fromthe government while he was a scientist at the Chinese Academy of Science.

Lenovo was the first company to sign up as a sponsor for the 2008 Olympics in Beijing. Itreportedly paid $65 million for a sponsorship deal involving the 2006 Olympics in Turin and the2008 Olympics in Beijing that includes providing computer equipment and services for bothOlympics. .

Lenovo is well entrenched in China and is regarded as one of China’s most trusted brands. As of 

2007, it had 35 percent market share of the Chinese PC market and sold it products at more than9,000 retail outlets. It has been able to out-compete foreign rivals such as Dell and IBM in Chinapartly because it doesn’t have to pay the tariffs foreign companies pay. Its market share in Chinashrunk after China joined the WTO as Dell and Hewlett Packard made inroads into the Chinesemarket.

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Lenovo has started selling computers on the international market under the Lenovo name. As of 2004, before the IBM deal, it had a 2.6 percent share of the global personal computer market. Ithad sales of $100 million in Italy, Spain, Germany and Britain, most of it in computer parts.

Lenovo and IBM

In December 2004, Lenovo Group’s bought a majority stake in the personal and laptopcomputer business of IBM for $1.75 billion, a relatively modest price It was one of the largestChinese overseas takeover deals ever. The move quadrupled Lenovo’s sales and made it the thirdlargest computer company in the world. Before the deal Lenovo was the 8th largest computer company in the world. Much of the deal was worked out by a woman, Mary Ma, Lenovo’s chef negotiator and chief financial officer.

The move is expected to improve Lenovo’s name recognition. Lenovo will be able to freely usethe IBM and Thinkpad names until 2010. After the acquisition Li said, “This acquisition willallow Chinese industry to make significant inroads on the path of globalization. IBM’s PCbusiness operated factories in Raleigh, North Carolina and employs 10,000 people worldwide,with 40 percent of them already working in China. The entire company has 319,000 employees.

In the deal Lenovo obtained IBM’s desktop PC business, including research, development andmanufacturing for $1.25 billion in cash and shares while IBM retains a 18.9 percent stake in thecompany. Including $500 million in liabilities Lenovo agreed at assume the total value of thedeal was $1.75 billion. Lenovo moved its worldwide headquarters to New York. Its chief executive officer is Stephen Ward Jr., an IBM senior vice president. IBM held on to mainframebusiness and planned to focus on consulting, services and outsourcing.

IBM had want to unload its PC business for some time. It was a drain n the company’sresources. There were some worries the deal might be scuttled by U.S. regulators over nationalsecurity concerns. There were other worries about the deal. including Lenovo’s lack of experience on the international markets and the weakness of IBM’s PC division, which often

posted losses.

Lenovo After the IBM Deal

The IBM deal boosted Lenovo’s global share to 7.7 percent, compared to 19.1 percent for Delland 16.1 percent for Hewlett Packard. With IBM, Lenovo is the fifth largest company in Chinawith sales of $12.5 billion, including $9.5 billion from IBM, in 2003. It has a 30 percent share of the computer market in China in 2006 It is 28 percent owned by the Chinese government and 13percent owned by IBM.

Lenovo’s United States headquarters is in Raleigh, North Carolina. It Asian operations and mostits manufacturing is in China. The company also has hubs in Singapore, Paris, Japan and India

but no official headquarters. Executive meetings are held 10 to 12 times a years in cities aroundthe globe.

A short time after the IBM deal it hired four of Dell’s top executives. Lenovo’s CEO (2007) isformer Dell executive William Amelio. He is based in Singapore. The chairman is YangYuanqing who is based in Raleigh. Many top executive are based in Purchase, New York andRaleigh. Much of the research and development is done in China.

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Lenovo sells computers to the U.S. State Department, including branches that deal withclassified materials. There is some concern in the United States that the computers could berigged in a way so they could provide classified materials to the Chinese government.

Lenovo’s aim is to become a global brand. It is introducing new products, building a worldwidedistribution system and spending a lot of money, including $50 million to be a top-tier sponsor atthe Beijing Olympics, to gets its name and brand recognized. In the United States, it is expandingsales outlets and charging lower prices than its rivals with desktops for as little as $350. In India,it is using Bollywood stars to advertise its products. Company CEO Yang Yuanqing told AP,“We went from a company that operated solely in China to a company with operations aroundthe world. The Lenovo, which was unknown outside of China before, is now known to more andmore people around the world.”

Lenovo stock, which is listedon the Hong Kong stock exchange, rose 120 percent between late2006 and late 2007. Profits rose to $66.8 million in the second quarter of 2007, with the Chinesemarket account for two thirds of sales. There is some chance Lenovo will be listed on the NewYork Exchange.

Lenovo was the only Chinese company that was a major sponsor of the Olympics. It was a co-sponsor of the torch relay and designed the striking scroll-like Olympics torch. It also providedmore than 10,000 pieces of computing equipment and 500 engineers to help deliver data andresults from more than 300 events to the media and audiences around the world. Lenovo was oneof twelve 2008 Summer Olympic Games worldwide partners that has marketing rights to use theOlympics logo globally. It also is a major sponsor in Formula One racing.

Lenovo recorded its first loss in three years in the final quarter of 2008 and its stock marked itsbiggest decline since 1998 due to the global economic crisis. Lenovo reported losses of $97million in the forth quarter of 2008 on the back of a 20 percent drop in sales due to the economiccrisis in 2008 . The company cut 11 percent of its work force as a result. CEO William Amelioresigned and was replaced by Yang Yuangqing.

Lenovo has had some success with it new line of small, sleek laptops and cheap netbooks. .

Chinese Chips

China is the world’s second largest chip maker. ????As of March 2004, China was the world’sfifth largest seller of chips in terms of volume after the United States, Japan, Taiwan and SouthKorea.

In the early 2000s, China was a leader in a low-end chips used by Chinese makers to makethings like calculators and clocks. It chips are not as advanced as those produced by Taiwan,South Korea, the United States and Japan but it was catching up fast. Many managers are

Taiwanese.China is catching with the United States in chip technology. Part of the reason for this is that

China has imported sophisticated chipmaking machinery that allowed them to make chips andlearn to the technology to make such machines.

The United States has complained that in it drive to be a major high-tech manufacturer, Chinahas placed an unfairly high tax on foreign chips and it is developing technical standards that are

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unique to China. There are worries that once China gets into chip manufacturing in a big way itwill produce a global glut, forcing prices to plummet.

Chinese Chip Makers

Semiconductors Manufacturing International is China’s largest chipmaker. SAST, Advanced

Semiconductor Manufacturing, All Best Technology and Huaxia Semiconductor Manufacturingare two four other large Chinese chip makers.

A number of computer chip plants have sprung up on the outskirts of Shanghai Together theyhave a capacity to produce about a half million wafers a month. Among them are a $1.5 billionplant opened by Semiconductor Manufacturing in 2002; a $1.2 billion plant opened by SAST;and a $750 million plant opened by Advanced Semiconductor Manufacturing in 2004;

All Best Technology has plans to open a $600 million plant in Shenzen and HuaxiaSemiconductor Manufacturing has plans to open a $1.3 billion plant in Beijing.

Foreign investors into Chinese chips include Intel, Advanced Micro Services, IBM, NEC,Philips and Toshiba. These companies invested in chips not because they saw chips as a major growth marketthere is actually a worldwide chip glutbut because they wanted to be close totheir buyers. A wide variety of chips are used in manufactured goods produced in China. Chinawanted the plants so it doesn’ have to import so many chips. As of 2002, it imported 20 percentof its chips.

Refrigerator factory

Haier

Haier Inc. is one China’s best known brands. It is the leading appliance maker in China, the 6th

leading appliance maker in the world and one the world largest maker of small refrigerators likethose found in hotel and college dormitory rooms. Based in the eastern port city of Qindao, it isvalued at $10 billion and is quickly making a name for itself as a producer of quality low-pricelarge appliances.

Haier was nearly in bankrupt in 1984 but turned things around. It began exporting refrigeratorsin 1992 and captured a quarter of the small refrigerator market in the United States by the early2000s. It had annual sales of $5 billion in 2000 and has 13 factories (including one in SouthCarolina) and 30,000 employees (more than one tenth in research and development).

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