Manufacturing in China -- With the promise of a large domestic market and low-cost manufacturing, the production torch passes to China.

While the electronics industry is experiencing a worldwide downturn, China holds promise as the bright spot for electronics manufacturing. With the anticipated entry of China into the World Trade Organization and the awarding of the 2008 Summer Olympics, many industry observers predict an unprecedented level of investment in China over the next seven years.

Weakened Economy Still Shows Growth

Weakened export demand has slowed China's industrial output for the fourth consecutive month-statistics show that value-added industrial production in June rose only 10.1 percent from the previous year. During the first half of 2001, industrial output was up 11 percent from the same period in 20001. While exports are slowing, growth prospects remain good and many companies are still upbeat on investing in electronics manufacturing facilities. With an eye on both a potentially large domestic market and low-cost manufacturing, companies worldwide are constructing new facilities in China or adding to existing plants.

Electronics manufacturing is centered in Shanghai, Beijing, Shenzhen (located in the Guangdong Province) and Xi'an/Chengdu. Activity also exists in Tianjin, Chongquing and Wuhan. China has 53 Science and Technology parks2.

Growing Infrastructure for Manufacturing

Historically, China has boasted limited production of semiconductor products, but new wafer fabrication facilities are under construction. NEC's joint venture fabrication facility with Shanghai Hua Hong, completed in 1999, produces memory and logic devices. Motorola has announced the construction of a new $1.9 billion wafer fabrication facility in Tianjin scheduled for full production in 2002. The facility's semiconductor products will be targeted to the cellular phone market. Semiconductor Manufacturing International Corp. (SMIC), financed by investors from Hong Kong, Singapore, Taiwan and the U.S., will invest $1 billion in a CMOS semiconductor fabrication facility located on an 86-acre campus in Shanghai's PuDong Industrial Park. The facility's products include static random access memory (SRAM) and digital signal processors (DSPs). Production will begin with 200-mm wafers. The number of semiconductor lines in Shangahi is expected to reach 15 in 2005 and 30 by 20103.

Advanced integrated circuit (IC) package assembly capability has been lacking in China, but Advanced Semiconductor Products (ASE), Amkor Technology and ChipPAC are establishing IC package assembly operations in Shanghai. Intel has a major assembly facility in Shanghai for non-central processing unit (CPU) products. Early assembly facilities will not feature the most advanced semiconductor packages, but most companies plan to add advanced packages and assembly capabilities in future expansions.

Hong Kong is well known for printed circuit board (PCB) shops such as Elec & Eltek and Wong's Circuits. Taiwanese PCB makers such as Compeq, NanYa, Unitech, World Wiser Electronics and Wus also have facilities in China. Multinational PCB maker Viasystems also has a plant in China4. IBM's expansion is through a joint venture with Great Wall. Advanced PCB production takes place at Multek in Guangdong Province, with products ranging from microvia boards for mobile phones to backplanes for high-end telecommunications systems. European-based AT&S has expansion plans in China for mobile phone microvia board production.

Contract PCB assembly operations have been established with investments from Hong Kong, Japan, Taiwan, North America and Europe. Such companies are moving into assembly of more than just games and toys. Namtai Electronics was established in 1975 and has moved from mainly calculator assembly to the assembly of products such as palm-sized PCs, personal digital assistants (PDAs), electronic organizers and dictionaries, language translators, spell checkers, IC card readers and cordless phones. Namtai is also a major supplier of chip on glass display modules.

Flextronics and Solectron have established numerous PCB assembly facilities in various parts of China to assemble advanced packages such as ball grid arrays (BGAs) and chip-scale packages (CSPs). Sanmina purchased Ocean's PCB assembly operations in Shenzhen and also has a facility in Shanghai. Major hard disk drive assembly houses provide advanced assembly of more than just flip chip suspensions on hard disk drives. For example, SAE Magnetics, recently purchased by TDK of Japan, also provides assembly services for complex optoelectronics components.

Contract PCB assembly operations include domestically grown companies as well as operations of worldwide electronics giants. In addition, many multinational companies have installed manufacturing sites in China. Spaced between banana and sugar cane fields in the Pearl River Delta are an increasing number of foreign names. Nokia will construct another facility in the Xingwang International Industrial Park in Beijing. The site will also be the location for the IBM China/Great Wall Shenzhen PCB facility.

Compaq, Dell, Hewlett-Packard and IBM have PC assembly facilities in the region. Almost every major Taiwanese maker has a facility in China-and the trend continues. Major Japanese electronics makers such as Matsushita Electric, NEC and Sharp have large manufacturing operations in China. Domestic companies, or companies with investors from Hong Kong, are expanding in number.

China's Manufacturing Future

China is clearly at the beginning of an impressive rise to become a manufacturing giant in electronics assembly. China's growth is about more than cheap labor on the shop floor. China has a wealth of engineering talent and is not limited by the availability of the latest analytical tools or manufacturing equipment. With a growing, increasingly prosperous population, the future China represents a new market for electronics products.

---

References

1. Asian Wall Street Journal, July 11, 2001.

2. International Conference on Electronics Manufacturing in Hong Kong and China, International Technology Research Institute, Loyola College, Maryland, July 7, 2000.

3. Nikkei Microdevices, July 2001, p. 27.

4. H. Nakahara, "The Board Balancing Act," PC Fab, November 2000.

---

E. Jan Vardaman is president of TechSearch International, Austin, TX; e-mail: [e-mail].

http://www.circuitsassembly.com

Copyright [copyright] 2001 CMP Media LLC