China, Partner to Many U.S. High-Tech Firms, Also Presents Fast-Growing Threat
By Kristi Heim, San Jose Mercury News, Calif. Knight Ridder/Tribune Business News
Mar. 14 - Propelled by a decade of stunning economic growth, China is racing to build a world-class technology industry, a prospect that is exciting and, increasingly, unsettling Silicon Valley.
China's appeal comes from its huge and fast-developing domestic market and its growing importance as a manufacturing partner for the world's tech companies.
The uneasiness comes from China's unexpectedly rapid progress toward its goal of becoming a center of both innovation and manufacturing that could challenge the valley and other U.S. tech centers.
"I don't know of a CEO in Silicon Valley today who doesn't have a plan for doing business with China," said James Morgan, chief executive of Applied Materials, a Santa Clara maker of equipment for the chip industry that has seen its sales in China grow significantly as it fills demand from Chinese chip-makers. "And if they don't, they better get one fast." Yet China's emergence in tech stirs anxiety about U.S. competitiveness. "The great American Dream is moving to Shanghai," said Brian Halla, chairman of National Semiconductor, which is opening a state-of-the-art testing and assembly plant near Shanghai as part of a $200 million expansion in China.
Increasingly, China is seeking to use its buying power to dictate separate technical standards for products sold within its borders, hoping to give a leg up to its own producers.
That prospect bothers U.S. tech companies like Intel, which believe in a more global standards approach. Last week, Intel, a major investor in China, said it wouldn't conform to the Chinese government's requirement that imported wireless-networking products carry its security technology by June 1, potentially ending sales of some of its wireless chips there.
China still faces some huge obstacles, such as a potential banking crisis stemming from bad loans and a growing gap between urban rich and rural poor that could ignite social tension. An unexpected event like the severe acute respiratory syndrome outbreak also could be disruptive.
Still, many Chinese express confidence.
"Chinese brands are now the top-selling cell phones in China, and that's one-fourth of the cell phone market in the world," said Ping Wu, president of Spreadtrum, a Shanghai start-up that designs chips for wireless communications. "We are definitely a future star." Signs of the tech boom are seen throughout China.
In Beijing, where ambitious students such as Rachel Zhu are learning design skills at Peking University's new school of software, young Chinese spend hours in virtual worlds battling each other in online video games.
On Shanghai's ultra-modern light-rail system, commuters chat on mobile phones, work on laptops or watch videos on the train's flat-screen monitors.
Semiconductor factories are rising on former farmland. High-tech districts brimming with start-ups, as well as universities, are replicating the Silicon Valley model in China's sprawling cities.
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