A Review of Chinas Electronics, IT and Materials Industries

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A Review of Chinas Electronics, IT and Materials
Industries
Professor Y. C. Chan Director of EPA Centre, City
University of Hong Kong
Engineers in Society ( EE3014 ) Lecture Series
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I. Electronics Industry

• Chinas electronics industry
• Current status
• Future development
• Asian perspective
• Summary

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Book Chinas Electronics Industry
Edited by M. G. Pecht (CALCE EPSC, University of
Maryland), Y. C. Chan (City University of Hong
Kong).

• Technologies, manufacturing, capabilities, and
  infrastructure of Chinas electronic industry.
• Different sectors of Chinas electronic industry
  semiconductors, electronic packages, printed
  circuit boards, computer hardware and software,
  telecommunications, and various electronic
  systems.
• Roles of research government, associations,
  research organizations, educational institutions,
  science and technology information networks, and
  major companies in establishing the
  infrastructure of Chinas electronic industry.

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Chinas Electronics Industry Now - Production of
Electronic Equipments

• Rise by nearly 24 billion per year
• Impressive figures, but expansion of Chinas
  production is cooling off
• Key issues over-heated investment, increased
  operational costs, reduced corporate earnings

Engineers in Society Lecture Series    
Source iSuppli
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Chinas Electronics Industry Now- Imports and
Exports of Electronic Products
US Billion
Year

• Import and export values of electronic products
  keep rising during 2003-2007
• In year 2007, 30 of export growth rate, 23
  of import growth rate
• Main imports IC (? 0.18 ?m), component
• Main exports notebook, handset, and LCD

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Source EE times
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Chinas Electronics Industry

• In the Nations 11th Five-Year Plan (2006-2010)
• Achieve breakthroughs in RD and production of
  ICs, software, key components, specialized
  electronic equipment and electronic materials
• Grasp key techniques and hold core patents and
  standards
• Meet demands on techniques and products for
  domestic application and form a relatively
  complete industry chain

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Chinas RD Expenditures

• Chinas GERD has steadily grown both in absolute
  terms and as a percentage of the GDP
• By year 2010, the ratio of GERD to GDP will hit
  2

GERD Gross Expenditure in Research and
Development GDP Gross Domestic Product
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Share of Global RD

• U.S. leads worldwide RD efforts
• China is by far the primary choice for offshore
  RD outsourcing
• Interest from the international RD community
  Chinese government incentives, infrastructure,
  academic relationships, and scientific capital
  investments

Engineers in Society Lecture Series    
Source Battelle Memorial Instituite and RD
Magazine Study 
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Chinas IC Development

• Steady growth of China's IC industry
• Annual growth rate exceeded 30 during 2002-2006
• Although slowdown, a steady growth of up 24.3 in
  2007
• Structure of China's IC industrial chain changes
  rapid development of package and testing industry
  (26.4 of growth rate), and slow growth of IC
  design industry (21.2 of growth rate)

• Major driving forces
• Product line construction gets new results,
  investment becomes the major impetus to drive
  industrial development.
• Enterprises' reorganization and reform make new
  progress, public listing becomes a trend.

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Chinas IC Development (Contd)

• Existing problems in IC industry
• Industrial development slows down, some key
  vendors' performances are unfavorable.
• Competition is heating up, IC design enterprises
  face challenges ? price wars become the most
  important means.

• Future
• The future of the global market is unclear, and
  industrial chain connection is not smooth.
• China's demand continuously increases.
  Improvements in industrial policy and investment
  environments, talent training and introduction
  drive the steady development of China's IC
  industry.
• China's IC market will hit its peak in 2008. Then
  the development speed will have a slowdown in the
  near future. It is forecasted that China's IC
  industry will keep a growth rate of 16.3 from
  2008 to 2012.

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Source CCID Consulting
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China Closing the Semiconductor Technology Gap
Feature Size (microns/nm)
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Korea
Changjiang River Delta
Pearl River Delta
Japan
Shanghai
Thailand
Taiwan
Malaysia
Hong Kong
Singapore
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Other Major Asian Players

• JAPAN critical component materials
• MALAYSIA EMS / OEM
• SINGAPORE ODM, computer peripherals
• KOREA LCD, IC, cell phone, camera modules
• TAIWAN IC foundries, flex circuits
• THAILANDcomponent, IC, HDD, household equipment

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Summary - Electronics Industry

• China as major electronics manufacturing hub
• Steadily increased RD expenditures
• IC industry has a steady growth in China, but
  the development will have a slowdown in the near
  future
• Synergy with other major Asian players in
  providing critical components / materials
• Environmental issues RoHS, WEEE, REACH

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II. IT Industry

• IT industry in the world
• IT market in China
• IT industry in China
• Future development
• Summary

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Information Technology
What is IT?
The technology required for information
processing and communication In particular the
use of electronic computers and digital
communication technologies to convert, store,
protect, process, transmit, and retrieve
information from anywhere, anytime.
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Global IT Report (2005-2006)

• One assessment of the impact of IT on the
  development of economics
• Three component indexes
• - the environment offered
• - the readiness of the community's
  stakeholders - individuals, business and
  governments - the usage among these
  stakeholders
• With a total coverage of 115 economies
  worldwide
• Singapore leads in Asia. Hong Kong is ranked
  11th and China 50th

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IT Market in China
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IT Market in China - Investment

• IT investment amounts to 288.66 billion Yuan in
  2005, and is expected to reach 381.74 billion
  Yuan in 2007
• Main business opportunities
• E-government
• Telecom
• Consumer IT products

Engineers in Society Lecture Series    
Source Report on Chinas IT Market 2005-2006
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IT Market in China - Investment Structure

• Mature IT market measurement software
  service 50
• IT investment structure in China is undergoing a
  quick adjustment period
• China still lags behind the Asia-Pacific and
  world averages at the moment
• Analyst sees a critical turning point in 2008

Source Analyst Predicts IT Sector to Mature by
2008 Report on Chinas IT Market
2005-2006
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IT Industry in China - Telecom

• Slowdown in 2005 telecom IT market caused by
  management reshuffling within operators and the
  pending 3G issuance
• 2006 telecom IT market has recovered
• Overall telecom IT market expected to reach
  42.234 billion Yuan in 2010 (excluding 3G
  investments)

Highlights over the next 5 years Business
intelligence (BI) systems, network management
systems, and value-added service (VAS) systems
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Source IDC Report China Telecommunications
Industry Solutions 2006-2010
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IT Industry in China - Hardware

• Hardware is still the main stronghold of Chinas
  IT industry
• Hardware market has entered into a mature period
  
• Steady development of the technology
• Competition among manufacturers heats up
• Slow growth rate in sales
• Gradually declined rate of profit

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IT Industry in China - Software Service
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IT Industry in China - Software Service

• IT software/services market is a growth engine
  of the total IT market
• IT services market expected to reach US 11.6
  billion in 2009, with a 2004-2009 CAGR of 21.6
• Highlight in IT services market IT Outsourcing
  Service
• Issues regulations and laws, unified standards,
  construction of credibility system, acceptance of
  the new concept, human resource

CAGR Compound annual growth rate
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IT Industry in China - Internet

• At a turning point now from provision of
  information and entertainment to development of
  utility functions
• Second largest country for Internet in the
  world Expected to become the largest in 2007
• Greatest potential in worlds internet markets
  over 123 million Internet users and 788,000
  websites in China by 2005
•  CN domain name registration attained 1,096,924
  by Dec. 2005, which ranked first among all ccTLDs
  in Asia and sixth in the world.
• In the year 2005, Blogers and attached concept
  of Web2.0 promoted tremendous development of
  China's Internet.

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ccTLD Country coded top level domains
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Future Development

• Opportunities
• Chinas accession to the WTO
• 2008 Beijing Olympic Games

• Crucial points
• Software and service
• Human resource
• Regulation
• Information Security
• E-Government
• E-Commerce

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Summary - IT Industry

• IT industry as a driving industry for the
  economical growth and social development
• China has one of the largest IT markets in the
  world
• Telecom IT is developing at a phenomenal rate
  software and service IT is the fastest growing
  part in Chinas IT industry
• China is experiencing an all-round change of IT
  investment structure towards a mature market

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III. Materials Industry

• Iron and steel
• Non-ferrous metals
• Electronic/information materials
• Energy materials
• Biomedical materials
• Basic chemical materials

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1. Iron and Steel- Production and consumption
above 35 of global production
Million Tons
Year
In year 2007, the total production value was
about RMB 2000 billions.
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Iron and Steel- Challenges and opportunities

• Too many small scale factories
• Low production efficiency
• Small RD investment
• Poor technology/equipment

• Large market
• Industry structure modification
• Increasing external investment
• Government support

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2. Non-ferrous metals- Production
Al, Cu, Zn, Pb, Mg, Sn, Ni, Sb, Ti, Au, Ag, Cd, Be
Million Tons
Year
In year 2007, exceeded 20 million tons for the
first time Ranking the first in the world for
the sixth consecutive year.
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Non-ferrous metals- Challenges and opportunities

• High cost and low price due to worldwide credit
  crisis
• Implement of Chinas tight economic measures
• RMB appreciation

• Discovery of new places of resources
• Big internal market
• External investment and cooperation

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3. Electronic/Information Materials- China

• Si
• Belated 10 years, in year 2007, monocrystalline
  Si 3500 ton, 35 of the global.
• SiGe/Si, GaAs, GaN, SiC, Silicon on insulator
• Poor in RD and production
• Photoelectron/display
• LED (GaN, SiC) in year 2007, 168 billion RMB,
  15 of growth year on year
• LCD in year 2007, export 50 billion RMB
• Indium tin oxide 6 million pieces/year, ranking
  first in the world
• PDP (21, 42) highly supported by government.

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Electronic/Information Materials- China (Contd)

• Fibers
• 33 of the global market, well developed
  technology and equipment
• In year 2007, capability of 36 million Km, 37.6
  of annual growth rate.
• Electronic ceramics
• Ceramic production 2100 tons
• MLCC is 900 tons/year, market need is 4000
  tons
• Poor in AlN ceramic production.

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Electronic/Information Materials- China (Contd)

• Magnetic materials
• In year 2007,
• NdFeB global production was 14.4 thousand
  tons, China produced 65
• AlNiCo global production was 7.8 thousand
  tons, China produced 38.
• Copper cladding lamination (CCL)
• Years 2006-2010, ranking the first in the world,
  25 of the global.
• Electronic soldering
• Sn based solders for SMT 20 thousand tons per
  year
• Flux more than 2000 thousand tons per year.

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4. Energy materials- Overview

• Main traditional energy materials
• Coal 17.36 hundred million tons
• Base oil 1.7 hundred million tons
• Natural gas 350 hundred million m3
• Over exploitation, continuable development?
• Available exploitation/storage oil is 2.6
  ton/person, natural gas 1074 m3/person, coal 90
  ton/person, which are 11.1, 4.3 and 55.4 of
  global average value, respectively.

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Energy materials- Water electricity and Nuclear
energy

• Water electricity
• In year 2007, annual electricity generation
  4332 hundred million KW.hour,
• need further development
• By year 2020, expected electricity generation
  11745 hundred million KW.hour.
• Nuclear energy
• In year 2007, nine nuclear power station,
  capability of 8.7 million KW,
• electricity generation 629 hundred
  million KW.hour.
• Percentage of nuclear electricity in total
  electricity

far less than the average
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Energy materials- New energy materials

• Primary energy
• Solar energy, biology energy, nuclear energy,
  wind energy, geothermic energy, sea energy.
• Secondary battery (hydrogen energy)
• In year 2007,
• Ni-H cell export 9.3 hundred
  million pieces
• Li-ion cell export 10.9 hundred million
  pieces,
• ranking the
  second in the world
• Solar cell global production 3436 MW, 35 of
  the global.

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5. Biomedical materials- Overview

• Bacterium, bacterin, toxin, serum, blood, immune
  agent, cell factor, antigen, monoclonal antibody,
  DNA recombinant, and invitro diagnostics reagent.
• Global 1000 kinds in clinical application,
  medicine growth rate 10-15, biomedicine growth
  rate 20-30.

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Biomedical materials- China

• Most of the investment on 16 kinds
• Gene HBV bacterin, Interferon (?,?,?), T cell
  growth factor, Streptokinase, Human Epidermal
  Growth Factor, Tissue Plasminogen Activator,
  Recombinant Human Insulin, Urokinase.
• Almost full copy, few RD, no innovation,
  profitable?
• Serious competition, superfluous and repeated
  production,
• long term phase, high risk, governmental
  financial support.
• Key new materials
• Biochip, Antibody/bacterin, Organ substituting
  materials, Blood purifying materials, Drug
  control and release materials/system.

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6. Basic chemical materials/products- Synthetic
resins/plastics

• Five main resins
• Polythylene (PE), polypropylene (PP),
  polyvinylchloride (PVC),
• polystyrene (PS), acrylonitrile
  butadiene styrene (ABS), etc.
• International production 1.342 hundred million
  ton
• China output and production value both
  increased over 15 high
• dependency on the import (the
  biggest import country), especially
• special and high-grade materials.
• Plastics
• Polyamide, polycarbonate, polyoxymethylene,
  polythylene, terephthalate, etc.

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Basic chemical materials/products- Synthetic
fibre production

• Terylene, nylon, acrylic fibres, etc.

above 32 of global production
Thousand Tons
Year
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7. Others and new materials- new industry

• Building materials
• Rare element materials
• New chances?
• Nano materials
• Eco-materials (green/environmental)
• Superconductive materials

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Summary - Materials Industry

• China has tremendous resources, e.g. rare earth
  resource.
• China has an intensive market for materials
  industry.
• Low-end technologies and products are mature.
• BUT
• On the contrary, high-end technology
  developments have lagged behind advanced
  countries.
• Related research and development expenditure is
  relatively small.

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Thank You!