China's Huge Growth. Can Hong Kong catch-up????????????????
asiansources.com
Focus on Hong Kong and ChinaPosted December 5, 1997
Forum puts Hong Kong, China industries in perspective
China strategizes on technology capabilities; without similar moves, SAR makers could be left at the starting post.
With intensive growth in consumer electronics demand, China's component requirements will be worth Rmb270 billion ($32.5 billion) by 2000, an attractive prospect for the big international vendors.
Tang Zhong Wen, Chairman of the China Chamber of Commerce for Import & Export of Machinery and Electronic Products, has called on industrial and business entrepreneurs to seize opportunities in joint ventures and cooperation with research, development, production, trading and other bodies in China. At the same time, he said upgrading technology development in the current and forthcoming five-year plan periods will ensure China plays a significant role in the huge market at component level.
While Hong Kong's electronics manufacturers have reaped short-term competitive-advantage benefits by their early move into China, without the backing of a solid R&D culture of its own, the future prospects of the Special Administrative Region's (SAR) electronics industry may not be so good, according to Allan Wong, Chairman and CEO of Hong Kong computer maker VTech Holdings Ltd.
Both Wong and Tang were speaking on Hong Kong's and China's electronics industries, respectively, at the Asian Electronics Forum, held in conjunction with Hong Kong Electronics Fair last October.
Noting that the degree to which electronics technology is promoted and applied is an important indicator of a country's economic growth and living standard, Tang said China is speeding up development of its electronics industry through market orientation and integration of internal and external factors. The aim, he said, is to transform the planned economy into a socialist market economy over the entire electronics industry. To satisfy needs consistent both with the country's economic growth and the pace of expansion in global electronics markets China will speed up development of ICs, 'new-feature' components, computers, software and telecom products. "In the next century we will certainly have an even greater market, probably achieving Rmb6,000 billion ($722.89 billion) by 2010."
High growth for China market
Underlining the huge requirements, Tang said China's market for electronic products is forecast to grow at an average annual pace of 30 percent during the current five-year-plan period-1996 to 2000-exceeding Rmb3,000 billion ($361.45 billion). Telecom products would account for more than Rmb180 billion ($21.67 billion), with telephone exchange systems increasing to 174 million gates, from 85 million in 1995, an average annual increase of 17.8 million gates. Mobile telecom will increase from 10 million users currently to 30 million users during the five years; and of a 20-million-unit market for computers, 6.5 million units will be in use by 2000, which, including hardware, software and services will give a market worth Rmb3,350 billion ($403.61 billion).
China's consumer-electronics market is estimated to be worth Rmb260 billion ($31.33 billion) by 2000. Color-TV penetration will have increased from the current 42 percent to over 60 percent. The color-TV market capacity over the five-year period is between 80 million and 90 million receivers. Also important, Tang said, is applied electronic equipment such as for industrial control, traffic management, medical and power-saving equipment, with a combined market worth Rmb100 billion ($12.05 billion) by year 2000.
Recognizing the importance of IC technology and output ability, Tang said China will concentrate on its technological, production and financial capacity to improve development and design of ICs, with targeted annual output of 1 billion to 1.2 billion IC chips and 2.5 billion ICs by the end of the century. Efforts to develop chip-type components, advanced displays, sensors, photo-electronic devices and other electronic and electrical parts will also be made, as will upgrading the production scale of these components.
Large-scale production capacity for computer hardware and a new industry for software should also be formulated, along with service facilities, he said. "By the year 2000, production capacity for 4 million sets of various types of microcomputers, and 6 million sets of monitors, peripheral printers, hard, floppy and CD-ROM drives and other such equipment should be accomplished."
China will also have capacity for 3 million kilometers of optical fiber, with corresponding capacity for optical terminals, plus 2 million to 2.5 million lines for mobile exchange systems, as well as technical equipment like satellite communications, and broadcasting and sensing equipment.
New mechanisms
Increased pressure on reform is necessary to accomplish these goals, Tang said. "New operating and management mechanisms will be implemented. A number of large enterprises-those with a good foundation-will be supported. Their production scales will be built up and their market competitiveness enhanced through mergers and acquisitions."
Tang said these reconstituted enterprises would have a 'pillar effect' and would lead small and medium enterprises in reform, providing motivation for necessary adjustments in corporate structures for China to change from the traditional single-manufacturing industry into a modern information industry.
"There will be a strong push to raise companies' ability to innovate. Enterprises will be encouraged to establish development centers and, jointly with science institutes, turn technical achievements into productivity so that the key technological domains and mainstream products are to a large extent vested with China's own intellectual rights."
Will China's gain be Hong Kong's loss? Stressing that he sees the migration of the SAR's manufacturing to Southern China as a rounding out rather than a hollowing out of its industry, Wong, said the managerial skills, global outlook and capital resources of Hong Kong's electronics industry remain crucial. "Whether your factory is an hour away in China or underneath your nose makes little difference. So while it's usual to speak of Hong Kong today as a center for services, manufacturing still thrives, but at a little distance."
But while it was this 'little distance,' physically and culturally, that gave Hong Kong makers a strong competitive edge in the late 1980s, Wong said the long-term prospects may not be so rosy. "Hong Kong's electronics manufacturers have been distracted by volume, by the lure of competitive advantage and the challenge of transnational entrepreneurship. They have forgotten-if they ever really knew-that it is just as important to upgrade technology and invest in research and development."
Lagging in high-tech areas
Hong Kong is the No.1 exporter of electronic watches, its calculators do well in a variety of markets and it has moved ahead in A/V equipment. But it lags well behind in high-technology areas, notably computers, multimedia and, ironically, telecom, said Wong, whose own company, computer maker VTech, is Hong Kong's largest electronics manufacturer, with annual sales exceeding $600 million. Taking the SAR's telecom sector as an example, Wong said Hong Kong has leapfrogged at the macro level-excellent digital infrastructure-but has barely started at the micro level-advanced communications equipment.
"We find ourselves on the edge of a major global growth area. If we are to move to center stage, as a community we must invest strategically in higher education and research opportunities," he said. "At present we have a culture that is very entrepreneurial, very business oriented. This will continue to be a strength, but it cannot take the place of applied research, let alone the basic research I believe is needed."
In the late 1960s, when Hong Kong's small assembly lines were the favorites of the multinationals, their brightest young technical and engineering staff mostly got their training from local plants of U.S. MNCs. Wong said that given Hong Kong's many achievements since then, technological and scientific education still lags behind need, despite increased government funding for research. While this gap is one of the greatest challenges Hong Kong now faces, he believes we are about to see a concerted effort by the SAR government to bridge it.
He also sees a reconsideration of China's labor market. "The skilled and semi-skilled labor that has helped bring double-digit growth to Hong Kong makers is itself growing more expensive, and a new wave of manufacturing migration is underway to other places in Asia. Hong Kong should turn its attention to China's increasingly large pool of technological labor. A well-educated elite is emerging in China. This elite should be encouraged to blend into the proven skills of Hong Kong. Whether we go to this labor pool, or it comes to us, are questions our community will have to think seriously about."
Electronic Components - January 1998 |
