Companies in China worry about nationalistic policies--not spy plane incident
By Mark LaPedus
Semiconductor Business News
(04/10/01 17:52 p.m. EST)
HONG KONG -- The current standoff between China and the United States over the collision of an American surveillance plane and a Chinese jetfighter is clearly harming the delicate political relations between the two countries. But will this incident impact U.S.-Sino trade relations, especially in high-technology sectors?
For now, most U.S. multinationals doing business in China claim that it's "business as usual" in the country, in spite of growing tensions between Beijing and Washington. In fact, one major U.S. company in China--Motorola Inc.--claims the U.S. surveillance plane incident will have no bearing on its current or future business in China.
Relations between Motorola and the Chinese government remain on solid footing, insisted Stephen Tsao, senior marketing manager for the Asia-Pacific region at Motorola Semiconductors Hong Kong Ltd. "Motorola has been friends with the Chinese government for a long time, and we don't believe that will change," said Tsao in an interview with SBN in Hong Kong last week.
Indeed, Motorola has been a household name in China for a long time. Over the years, the company has spent billions of dollars to promote its brand name and products--such as cellular phones and pagers--in the country. And it has even gone so far as to building a major manufacturing complex and new 8-inch wafer fab in Tianjin, China.
But still, there are some worrisome signs for Motorola and other multinational companies in China--the world's fastest growing market for cell phones, PCs, semiconductors, and other high-tech products. In fact, China's electronics market is booming at a time when other regions are slowing due to weaker economic conditions.
While the world watches to see if the U.S. spy plane incident will play a role in trade relations, the real concern among multinationals in China is the government's nationalistic policy towards the development--and procurement--of the new and emerging domestic brands.
In fact, the government is pushing many state-run enterprises to enter some new high-tech markets, such as PCs and cell phones. As a result, Chinese-based enterprises--which once specialized in only making TVs and refrigerators--are suddenly finding themselves competing toe-to-toe with major foreigner suppliers of PCs and cell phones.
In the PC market, the home grown Chinese brands are winning the war. Six of the top 10 PC makers in China are domestic. And the Legend Group, the largest PC maker in China, is said to already have 30% or more market share in that nation.
It could be the same story in the networking-equipment markets, including broadband systems, switches, and routers. Right now, the Chinese government appears to be pushing its state-run enterprises to procure these types of products from domestic suppliers--at the expense of Cisco, Lucent, Nortel, and other foreign brands.
In the cell-phone market, some 10 Chinese companies have recently entered the handset business in an effort to compete against the likes of Ericsson, Motorola, Nokia, and other foreign suppliers. But for now, the multinationals own 80-to-90% of the cell-phone market in China.
The multinationals also dominate China's chip markets. China and its domestic OEMs must still import some 80-to-90% of their chips--such as microprocessors, memories, and others--from the multinationals.
And that will not change for some time, according to industry observers here. China is developing its own semiconductor industry, but the nation is still far behind in terms of process technology and designs.
So, U.S. chip makers are experiencing brisk sales in China, at a time when Europe, the Americas, and other regions are slowing to a crawl. And the last thing that U.S. chip vendors need right now is to get caught in a prolong showdown between Beijing and Washington. While some American politicians might think trade barriers from a conflict will hurt China's emerging high-tech industries (and it would), a new trade war would most definitely be devastating to U.S. chip suppliers. |
