Hi Maurice, When demand eventually turn up (yes, I can be a optimist just like you), it may be overwhelmed by supply (oops, there I go again). I actually am starting to think electronic hardware may never be a good 'growth' business again, given the ease of know-how transfer, and hog wild capacity building still going on.
nni.nikkei.co.jp
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Wednesday, August 29, 2001
ANALYSIS: Electronic Device Firms Aggressively Invest In China
TOKYO (Nikkei)--Major electronic device makers in the Osaka area are scrambling to build production bases in China and other foreign countries. The move contrasts with that of leading semiconductor makers, which are closing plants and scaling back capital investment due to the prolonged weakness of the information technology market. Device manufacturers, preparing for an expected recovery in demand, have been particularly aggressive in China where many of their clients are operating.
In July, Nitto Denko Corp. (6988) announced that it would build a new plant in China to manufacture high-density flexible circuit boards used for mobile phones and liquid crystal displays. The company will spend 10 billion yen on the plant, to be located in Suzhou in Jiangsu Province. Construction is already under way, and operations are slated to start in the spring of 2003.
The company is also building a new plant in Wisconsin, in the U.S., which will manufacture industrial adhesive tape used to glue electronic devices and protect their surface. The plant, involving an investment of 6.5 billion yen, will start operating next spring. In September, the company will also establish a local processing subsidiary in the Philippines.
Murata Mfg. Co. (6981) recently set up a manufacturing and sales subsidiary for electronic devices in Jiangsu. In October, the subsidiary will begin producing chip-laminating ceramic condensers, used to adjust the circuits of PCs and other electronic equipment. The firm invested 100 billion yen in plant and equipment last fiscal year, but felt that additional capacity was needed, despite the adverse business environment.
Sumitomo Special Metals Co. (6975) began constructing a plant in the suburbs of Shinsen, China, at the end of July. The firm will invest 1 billion yen in the project. The plant will produce a small-sized version of NEOMAX, a rare-earth magnet used for core components such as microspeakers of mobile phones and pickups which read data on CDs. The plant will start full-scale operations next April.
These companies are finding that they cannot bolster international competitiveness by scaling back investment. Instead, they have realized that they need to closely monitor developments in China. Targeting manufacturers from worldwide of mobile phones, PC peripherals and audiovisual equipment which are operating in China, the company wants its new Suzhou plant to play the key role in its reorganization of Asian operation.
Sumitomo Special Metals, which has about 50% of the global market for small-sized special magnets, plans to make about half of these magnets in China. Business strategy manager Kaoru Doigawa said, "It is natural for parts makers to go where equipment manufacturers gather."
Murata Mfg. has opted for a cautious approach, renting a new plant and initially limiting investment to 600 million yen. The company stepped up its capital investments last fiscal year, although it tried to minimize fixed outlays by limiting an increase in hiring. Although it too is bullish on China, it is proceeding cautiously given the prolonged slump in demand.
(The Nihon Business Daily Wednesday edition)
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