China today: views and thoughts on the CPCA show and the benefits--and perils--of doing business in China.

The China Printed Circuit Association show has been billed as the world's premiere PCB trade show. This year's event once again lived up to its reputation. CPCA had it all, from acrobats at one exhibitor's booth to exhibitors hawking counterfeit wares on the show floor. (And being detained by authorities, an encouraging sign.)

CPCA is a direct reflection of China, itself a country of superlatives. A few of China's basic numbers: There are 160 cities in China that have a population of more than I million people. China is now second in the world (to the U.S.) in its use of oil: 6.5 million barrels a day in China vs. 21 million barrels a day in the U.S. China should take the lead in 15 years.

Do you realize that China has virtually wiped out Japan's television industry, Germany's Christmas ornament industry, Italy's textile industry and the American furniture industry? This is a country whose 2003 GDP was $1.4 trillion, seventh in the world (U.S. GDP was $10.1 trillion). And the scary part is that experts used to believe that the Chinese were fudging their numbers up; now those same experts are pretty sure that they're fudging their numbers down.

Shanghai alone has more foreign investors and investments than all of Indonesia, and more than all of Mexico. Do you detect a trend?

On the PCB side, most estimates show that there are at least 1,000 PCB companies in China. The official count from the CPCA is about 650.

This is my third year covering the CPCA show, and each time I am overwhelmed. Every year I hear more English, see more Western sophistication from Chinese companies and see huge growth from foreign companies doing business in China.

Since China set about reforming its economy a generation ago, it has grown at an official rate of 9.5% a year. Countries in the early stages of economic reform often come up fast, but not like China. The country is closing in on a 30-year run during which its economy has doubled nearly three times over. The surge has no equal in modern history.

--Ted C. Fishman, China Inc.

Every year the CPCA show gets bigger. The best guess is that attendance and the number of exhibitors increased by 30% this year. I could not get solid numbers because registration is not computerized.

In the past year we have doubled our business here in China and we expect to do almost as well this year. Our R&D effort is now geared to what our Chinese PCB customers need. There is little reason to be in North America when the future of the industry is here.

--Roy Porat, president, Camtek Pacific

More and more Western companies are coming to China as they get the message that this is the place to be. This is why the CPCA show continues to grow - more Western PCB companies keep coming to China to take advantage of the market there, while Chinese companies are maturing and exhibiting in hopes of selling their products to the rest of the world.

This show now represents the true crossroads of the global PCB market; compared to this one all other shows are secondary.

--Bob Neves, president, Microtek

Most of us know that we should be doing business in China, but how does one go about getting started? I can hear some of you thinking, "No big deal. We'll just get a couple of companies together, strike a deal and get to work."

Really? Good luck with that. There is one simple rule when doing business in China: Nothing is simple in China, ever. Every year I am amazed at the suppositions, preconceived ideas and false assumptions that Americans make about China, and our industry in particular. For those of you who have not been to China lately (i.e., within about two years), it's time to go. You need to see China's business climate for yourself, to feel the energy and excitement, and then go back to your own business and view it from this new perspective. Only then will be you be somewhat prepared to strategize about your company's future.

This feeling of excitement is just not found back in the more "sophisticated" countries like the U.S., where everything is taken for granted. In China nothing is taken for granted, even freedom. Everything, including freedom, can be taken away at a moment's notice.

Certainly communism has become a silent form of government; one might be tempted to think that it is non-existent. And if you think communism has been relegated to some old drafty offices in those big gray buildings, then think again. I find it interesting that anyone who tells me that communism is meaningless does so with a nervous glance over his shoulder.

In fact, China is the most capitalistic (communist) country you will ever see. Absolutely everything is for sale. While setting up for the CPCA show we were visited by people who wanted to rent us tables, chairs and lights; handle our printing; and bring us lunch every day.

The Foreigners 

While in China I interviewed Frank Keohane, founder and managing director of Ireland's Litho Circuits and PCB Portal. As a broker/distributor who sells Chinese PCBs all over the world, Keohane can offer insight into what it's like to do business with Chinese PCB fabricators. Here are the highlights of that interview.

PCD&M: What is it like dealing with the Asian board houses?

FK: Sourcing boards from Asia has not been without its headaches and is not for the faint-hearted. Unless you visit the manufacturer and perform an audit, you have to rely on Web sites, capability statements, referrals and trial orders.

Generally speaking, quality has been good but delivery can be problematic. Until you are an established customer with a significant amount to spend, I think it's the case that you are not high on the "pecking order," so to speak, and any problems can be difficult to sort until you are established. The main issues we have encountered are the cultural East-to-West differences (many of the shops are state-owned) and the language barrier itself.

Also PCB manufacturing in Asia is still relatively in its infancy, so technical appreciation at some shops is somewhat behind that experienced in the West and simple terminology can be interpreted very differently. We have, however, seen that this situation is changing extremely rapidly, so much so that we believe that it will not be long before Asian PCB shops can provide almost anything that can be sourced elsewhere worldwide. The time differences can either be problematic or an advantage--most of our suppliers provide customer managers working in the same time zone so that we can call or e-mail and receive a prompt response. Also, some of the shops work a 24/7 system, which helps with the fast turnaround batches.

The Asian contacts we have are generally very polite, reliable, hardworking and eager to please, but this may be down to understanding what we are about as a customer and the relationship that has developed over time. It's OK when things are going well but it's not unusual to have to apply a little pressure when needed.

PCD&M: How has it affected your board shop in Ireland?

FK: We have seen a 40% increase in offshore sales in line with our business plan, which we hope will increase during this financial year.

PCD&M: Do you have any recommendations for other people who might be thinking about moving into China?

FK: I recommend either taking advice from companies currently trading in Asia or trading directly with them, as they may have the necessary experience. Carefully select your suppliers, refer to organizations such as IPC and CPCA, and plan the sourcing process, which will include visits to Asia.

The Chinese

We may have a pretty good idea what the American and European companies are up to, but the Chinese point of view is tougher to pin down. I interviewed representatives from several Chinese companies who were exhibiting at the CPCA show.

We are about to enter the American marketplace with our copper-clad laminates. But there are many challenges, the hardest being the lack of good market research. There are also concerns about rules and policies. There is just no good way for us to learn these things. We are hoping that as our countries become more cooperative, these things will become easier. We also do not know how to advertise in the U.S. To us advertising rates are very expensive and beyond our budget. We are looking for ways to get our message and then our products out to the U.S. market.

--Emily Yew, Microcosm Technology

Up until now we have focused mainly on the domestic market. We want to make a good foundation in this market and build a good frame for our products. Then we will consider entering overseas markets. But we need good market research and improved communication channels.

--Lai Hui Zhow, All Profit Electronics Technology

Our products are technologically competitive in the overseas market. In fact, our products possess first-class quality worldwide. Unfortunately, most American companies do not know how to choose a supplier or partner among so many Chinese candidates. On one hand they lack sufficient information about Chinese companies. On the other hand, they somewhat do not trust Chinese companies. Instead they would rather turn to consulting companies to help in their decision-making. It is a real pity for both sides to lose many chances for cooperation. Chinese companies are nowadays very active, hoping much to join the global market for competition. Meanwhile many companies have established their own uniqueness with both high technology and low cost. I think that there should be direct communication channels between Chinese and American companies.

--Euphon Wong, marketing executive, Plating and Engineering Chemicals Co. Ltd.

One can't help wondering: How fast will China's population yield a middle class? (Young female factory workers in China still make about $72 a month.) Will the communists close the doors again some day? If China's prices go up, who will be the next China?

Stay tuned.

DAN BEAULIEU is founding partner in D.B. Management Group (www.dbm pcb.com). He can be reached at 207-873-0793; [e-mail].