TITLE : China IT Firms Enjoy Jump in Orders
URL : nikkeibp.asiabiztech.com
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March 18, 2002 (GUANGZHOU, China) -- Electronics makers in China's Guangdong Province say there has been a pickup in demand from U.S. and Japanese information-technology companies, signaling a long-awaited recovery in the IT sector.
Orders for personal-computer parts -- a leading IT indicator -- have increased, boosting plant utilization rates, according to mainland manufacturers.
A company executive at Prime Technology, an electronics-manufacturing-service provider affiliated with a Taiwanese firm, said orders in January and February grew 400 percent from the same period of 2001. Prime Technology's Guangzhou plant has been mass-producing PC motherboards for Compaq Computer Corp., Canon Inc. and Xerox Corp., among others.
Some 2,000 workers at the plant assemble motherboards in two shifts, 24 hours a day. The entire output is exported, with 70 percent going to the U.S. and the rest to Japan.
"Demand for liquid-crystal-display substrates for multifunction printers, which also are used as fax machines and scanners, and for flat-panel PCs is rising fast," the executive added.
Prime Technology's plant utilization rate plunged to as low as 10 percent in the April-June quarter of 2001, but rebounded to 50 percent in the October-December period, and to 80 percent in the first two months of this year. "The steady increase in incoming orders for the April-June period will raise demand for the quarter by 20 percent from the preceding quarter," he said.
Behind the increase lies progress in inventory adjustment at U.S. firms. In the October-December quarter of 2001, inventories at U.S. electronics companies declined by record amounts. Since January, however, the inventory decrease has been slowing.
USI Electronics Co., another EMS provider affiliated with a Taiwanese firm, has been making 400,000 motherboards a month for IBM Corp. of the U.S. This has helped push capacity utilization to almost 100 percent since October 2001, with no sign of demand slowing in the near future.
Fittec Electronics Co., an EMS provider affiliated with a Hong Kong firm, is enjoying a jump in orders for motherboards from Taiwan and Japan. "An increasing number of our customers are adding 10-25 percent to orders placed earlier," a Fittec executive said.
"Judging from talks with our customers, I think the recession in the high-tech business is bottoming out," said Kiyomi Mimasu, president of Kaga (H.K.) Electronics Ltd., which produces motherboards in Shenzhen.
The latest spate of business data confirms this optimism. Both the leading economic indexes of Guangdong Province and export-order backlogs recorded in Taiwan have been showing rapid recovery. The export-order backlogs began to rebound last October and posted 9.2 percent growth in January, the first positive growth since March 2001.
With many Taiwanese firms outsourcing production to Chinese firms, Taiwan's export-order backlogs is seen as a leading indicator of the economic health of Guangdong Province.
And while statistics produced by the province itself cannot be taken entirely at face value, the simultaneous upturn in both sets of figures has convinced many analysts that a real recovery is under way.
Xiao Minjie, senior economist at Daiwa Institute of Research Hong Kong, said more PC users are replacing their cathode-ray tube monitors with flat-panel LCD models. The economist also suggested that many PC makers have disposed of excess inventory of CRT monitors. Price competition in IT goods is intensifying, however, and more firms are relocating production to the Pearl River delta region in southern Guangdong Province, he said.
This shift is not only motivated by low production costs, which are about a third of those in Thailand and Malaysia. About 14,500 foreign-affiliated firms are located in the city of Dongguan alone.
The high concentration of such firms has helped make production of sophisticated electronics parts more efficient, which in turn attracted more firms. The proximity of cities in the Pearl River delta region to Hong Kong, which acts as a financial and distribution center, also contributes to what many regard as an ideal business environment.
Meanwhile U.S. and European firms are shifting their orders to more competitive manufacturers affiliated with Taiwanese concerns, as the fight for survival among local mainland firms intensifies, according to Xiao.
In 2001, manufacturers in China produced about $28.2 billion in IT products, with firms affiliated with Taiwanese concerns accounting for 56 percent of total output.
Nozomu Kitadai, Nikkei Staff Writer
(The Nikkei Weekly) |
