Justa: Perhap's China can help the chip sector find a bottom?
China's tech boom proves boon to U.S. chipmakers
By Edward Iwata, USA TODAY - 10/31/2001
SAN FRANCISCO — While the U.S. chip industry endures its worst slump
ever, it's getting a boost from an unlikely ally: China.
China will be the No. 1 growth market for chips this year, with sales rising 18%
to $13 billion, says analyst Grant Johnson of Converge. The rest of Asia, the
USA, Europe and Latin America are suffering 20% to 40% revenue drops.
"China is helping to keep the industry afloat," Johnson says. He says it will be
the world's No. 1 semiconductor market in revenue by 2010.
Despite global economic gloom, chip firms continue to pour more money into
China:
• Chip king Intel said last month that it will invest an additional $300 million into
its $200-million assembly-and-test plant in Shanghai. By 2004, Intel will add
3,000 workers to the site's 1,200. The 2-year-old plant, which cranks out
flash-memory chips, also will produce chipsets for Intel's Pentium 4 chips.
• Top chip equipment-maker Applied Materials said last week that it will ship
$200 million in factory equipment to Grace Semiconductor Manufacturing in
Shanghai. About 1%, or $100 million, of Applied's revenue this year will come
from China. CEO James Morgan says that may reach 20% within the decade.
"We've been developing our relationship for a long time, and it looks like it'll pay
off," says Morgan, who hosted Chinese President Jiang Zemin on a Silicon
Valley visit in 1983.
• Motorola just completed a plant and plans to expand an existing site in Tianjin
for $1.9 billion. Motorola has 10,000 workers and $3.4 billion invested in China
and will continue to expand there.
Tech firms are encouraged by China's anticipated entry into the World Trade
Organization, which may be approved next month. Under WTO membership,
China must adopt a range of reforms, including lower tariffs on chips and other
goods. Plus, China has dubbed high-tech one of the "Four Pillars" driving its
economy. China boasts a huge workforce of computer engineers and factory
workers, but it needs financing and state-of-the-art technology from the USA.
The potential is vast. China's 19 million PC users may grow to 70 million by
2005, the Chinese government predicts. And China's 99 million cell phone users
are expected to grow to 246 million by 2005, research firm Gartner says.
Obstacles abound, of course. How much China will open its markets remains to
be seen. Corruption and weak enforcement of intellectual-property laws remain
problems. Plus, since several U.S.-China spying controversies, U.S. tech
exports are coming under tighter scrutiny by the U.S. government.
Nonetheless, experts are bullish. "The sleeping giant is starting to live up to its
hype," Johnson says. |
