Easing of China's telecom growth not slowing chip expansion
By Mark LaPedus
Semiconductor Business News
(03/26/01 06:16 a.m. PST)
BEIJING -- Chip suppliers are hoping China will give them much-needed relief from the telecommunications slump the U.S. and elsewhere around the world, but there is cause for concern that the huge market potential here could ease if the economic slowdown seeps into this country.
"China continues to show good signs of growth relative to some of its Asian neighbors," noted Steve Perna vice president and general manager of the Optical Networking Division at PMC-Sierra Inc. "In the first half of 2001, demand still remains healthy [in China]. "However, domestic Chinese companies are now concerned that the second half of 2001 will be slower," said the vice president of the Burnaby, British Colombia-based chip supplier.
In China, a massive effort is underway to build up the country's communications infrastructure. But a number of major network systems suppliers are now preparing for slower growth in the second half of 2001, and as a result they're trimming back their capital spending plans, according to analysts.
For example, telecom-equipment maker Huawei Telecommunications Co. Ltd. of China--which considered the "Cisco" of China--is reportedly looking to reduce its spending by a significant amount in 2001, sources said.
"The economic slowdown in North America will affect China," said PMC-Sierra's Perna "The locals assume it's just a matter of time," he added.
But compared to the U.S. market, China will continue to be a hotbed of activity for local- and wide-area networking equipment, chips, and components, said Jinzhu Li, field applications engineer for Vitesse Semiconductor Corp.'s China subsidiary in Beijing. Camarillo, Calif.-based Vitesse is a supplier of chips for networking applications.
"There are still a lot of opportunities in China for Vitesse and our competitors," Li said in an interview with SBN in Beijing today (March 26).
In fact, a number of communications chip makers are scrambling to expand or get a foothold in China, including Agere, AMCC, Conexant, IBM, Intel, PMC-Sierra, and Vitesse.
And the stakes are gigantic. For example, China's demand for optical fiber alone is projected to grow 140% over a six-year period, from 6.6 million kilometers deployed in 1999, to 16 million by 2005, according to IGI Consulting (IGI), based in Boston.
The rapid deployment of backbone networks in China will also fuel the demand for optical technologies like synchronous digital hierarchy (SDH) and dense wavelength division multiplexing (DMDM).
The DWDM equipment market is projected to jump from $185 million in 2000, to $1.5 billion by 2005, according to IGI. SDH, which is the Asian and Euorpean standard for SONET, is projected to grow from $700 million in 2000, to $3.7 billion by 2005, they said.
At the same time, China is buying the latest and greatest technologies. For example, state-run China Netcom last year completed the first phase of a cutting-edge, Internet network based on DWDM technology. The network, said to run at transmission rates of 40-gigabits-per-second (OC-768), will enable the Internet and broadband services to reach 17 cities in China.
In terms of mass deployment, though, China's carriers are currently migrating their networks from OC-12 (155-megabits-per-second) to OC-48 (2.5-gigabits per-second), said Vitesse's Li.
By year's end, China's major carriers may deploy networks with transmission speeds of up to 10-gigabits-per-second (OC-192), Li said. "My customers are interested in 40-gigabits-per-second, but I don't feel that the technology will be in production for awhile," Li said.
There are other issues in China as well: Will there be a slowdown in spending in the nation's telecommunications sector?
"Until now, I don't see any slowdown," Li added.
Others predict the market will ease up in the latter part of 2001. "It looks like equipment spending is slowing slightly in Korea, Taiwan and Australia, while China seems to be committed to growth at this time," said PMC-Sierra's Perna. "[China was] not as fast as North America in their build-out in 1999 and 2000, so they are playing catch up to a certain degree," he said.
In 2001, however, it could be a different story. "Competition is much stronger [in China], due to the slow down in North America," he said. "So, big telecom/datacom companies are paying much more attention to China and are very price competitive to reduce their inventories and retain market share." |
