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Round-up Report
February 2004
SMIC to boost expansion in China(Feb 23, 2004)
Semiconductor Manufacturing International Corporation (SMIC), China’s biggest chip foundry, recently announced that it shipped 477,000 8-inch wafers in 2003 and recorded its first profit of US$10 Mn in Dec. 2003. SMIC also stated that capacity will increase from 49,000 wafers per month at the close of 2003 to 114,750 8-inch wafers per month by Q42004 – a massive 134% jump. Major clients of SMIC include: TI, Samsung, Infineon, Elpida as well as other Chinese IC design companies.
The company currently has three 8-inch fabs in Shanghai, one 8-inch fab in Tianjin and plans to build one 12-inch fab in Beijing in 2004. To raise money for its aggressive expansion in capacity, the company plans to list on both the Hong Kong and New York stock exchanges although some delays have taken place due to questions over a lawsuit filed by Taiwan Semiconductor Manufacturing Corporation (TSMC).
Major shareholders of SMIC include: Shanghai Holdings (12%), Motorola (11.4%) and Beida Jade Bird (6.8%).
China’s handset exports hit 95.23 Mn units in 2003(Feb 23, 2004)
China’s handset exports achieved 95.32 million units, up 50.8% year on year, based on data from the Ministry of Commerce, making China the world’s largest handset exporter in 2003.
The total handset export value was US$7.37Bn, up 39.5% over 2002. Among the total, 98.7% of the handset export revenue came from the China operations of multinational companies like Motorola, Nokia, Sony-Ericsson and others.
The top three destinations for China’s handsets in 2003 were the US (33.3%), Hong Kong (18.4%) and Germany (13.8%).
Unicom subscribers surge by 12.8 Mn in Jan. 2004(Feb 23, 2004)
China Unicom (Hongkong), a publicly-listed subsidiary of the China Unicom Group, recently announced that it saw a 12.8 million surge in subscribers in Jan. 2004. According to its announcement, the total number of GSM subscribers reached 73.552 million while CDMA users hit 20.073 million– a total of 93.625 million subscribers for China Unicom.
However, a large part of this increase was due to the company’s Dec. 2003 acquisition of nine provincial networks from its mother company, China Unicom group. The actual increase was 1.859 million new users with the acquisition bringing 250,000 new users and 10.933 million existing users.
The nine provinces that have recently joined the Unicom group include: Shanxi, Inner Mongonia, Hunan, Hainan, Yunnan, Ninxia, Gansu, Qinghai and Xizang.
Legend targets 100% growth, 20% Notebook market share(Feb 16, 2004)
Legend Group (0992.HK), China’s largest PC maker, which is undergoing a huge promotion campaign to re-brand itself as Lenovo, aims to increase its notebook market share in China from 15% to 20% in 2004.
Jianjun Lu, president of the company’s Taiwan branch, announced that Legend’s 2003 notebook sales in mainland China were 150,000 units. The company estimates that it has to double its sales by shipping at least 300,000 notebooks to achieve its market share target for 2004. Legend’s outsourcing partners include Quanta Computer, Compal, First International Computer and Mitac.
The top five notebook makers in China’s domestic market are: Legend (15%), Toshiba (14 %), IBM (13.5%), Dell (13%) and HP (10%).
Siemens sets up first Chinese software R&D center(Feb 16, 2004)
Siemens AG (NasdaqNM: SI) recently announced the start of its new software and system company in Nanjing, Jiangsu province. This is Siemens’ first software R&D center and aims to develop software for all Siemens’ operations in China and to cooperate closely with local universities. The company will hire 1,000 software engineers.
Siemens’ China manufacturing operations achieved US$3.6Bn including domestic sales and export revenue in 2003 fiscal year (Oct. 1, 2002— Sept. 30, 2003). It has over 40 branches in China in the areas of telecom, industrial automation, home electronic appliances and medical instruments. The software center will provide strong backup for Siemens overall operations and enhance its localization efforts in China.
ZTE to supply telecom equipment to Iraq’s reconstruction(Feb 16, 2004)
ZTE (000063.SZ), a Shenzhen-based leading telecom equipment manufacturer has recently signed a US$5 million contract with the Iraqi Ministry of Communications to supply telecommunications equipment to Iraq, according to a Xinhua report. Before that, Lucent (NasdaqNM: LU) was also awarded a US$25 million telecom reconstruction contract from the Coalition Provisional Authority.
ZTE has earned a good reputation for its quality of service in Iraq. Before the war, it was one of the main telecom equipment suppliers to Iraq.
In 2003, ZTE’s revenue hit US$3 billion, up 49.96% year-on-year. In this figure, international business revenue achieved US$605 million, accounting for 20% of the total revenue.
China cracks US$227B in 2003 electronics sales revenue(Feb 9, 2004)
China’s electronics sales revenue surged 34% YOY in 2003 to reach US$227 billion, according to the MII. This jump in revenue pushed China’s electronics industry to the leading position in the country, and solidified China’s position as the third largest electronics manufacturer in the world, following the US and Japan.
China became or maintained its world No. 1 manufacturing position in a number of products including central office exchanges, mobile phones, TVs and Monitors. China’s global market share of these products was 30%, 35%, 40% and 55% respectively in 2003. The actual production of PCs (notebooks and laptops combined), TV sets and central office exchanges reached 31 million, 60 million and 74 million ports in unit totals respectively. 40% of TV set and 60% of PC monitor production served export markets.
China to launch world’s largest e-ID project(Feb 9, 2004)
China plans to issue new electronic ID cards for each of its citizens between 2004 to 2008,opening a huge market opportunity of more than one billion smart cards in the process.
The e-ID will be a CPU-based smart card encoded with each citizen’s relevant personal information to ease the management of the government’s registration process. The new e-ID will allow more mobility of people to work and/or travel in the country, as the national police force and labor bureau will be able to track everyone anywhere and at anytime.
Tsing Hua University and its subsidiary, Tsing Hua Tong Fang Microelectronics Corporation, are developing the technical specifications for the data structure and format. Also, a number of Chinese ID design companies are involved in the design and development of the CPU-based smart card.
China reduces tariff on imported electronics products to 9.2%(Feb 9, 2004)
China cut the tariff on its imported electronics products to 9.2% starting from the beginning of 2004, according to a China Electronics Newspaper.
Based on China’s commitments to the WTO, China has to cut its average import tariff on a basket of electronics products from 9.9% to 9.2% starting January 1, 2004 and remove all tariffs by the end of 2005. The tariff on information technology products was reduced from 1.5% to 0.43%, a 71% drop. So far, 232 out of 256 types of information technology products were issued zero tariffs while the rest of them will be issued zero tariffs after Jan.1, 2005.
China Local Handset Makers to enter top ten in 2004(Feb 2, 2004)
China’s domestic handset sales will surpass 70 million in 2004, driven by development of new markets and services at China Unicom and China Mobile, according to a recent Gartner report.
Today, China is the largest handset market in the world with more than 270 million mobile phone subscribers. In this huge market, Chinese handset makers accounted for 55% of the entire local market share in 2003.
Three Chinese handset makers: Bird, TCL international and NanJing-based Panda all reached at least US$1Bn in revenue in 2003. Gartner expects that some Chinese local makers will enter into the top ten of worldwide handset makers in 2004.
MII aims to boost telecoms with relaxed fees(Feb 2, 2004)
An anonymous source close to the Ministry of Information Industry (MII) has announced that the MII will relax its control over telecommunications fees this year in an effort to boost the development of the highly competitive sector dominated by China Mobile, China Unicom, China Telecom and China Netcom.
With few changes to telecommunications fees over the past few years, it is rumored that China might be ready to adopt one-way calling charges. MII minister Wang Xudong sent out a strong message in January that the country is looking at a more market-oriented telecommunications pricing policy. "We will continue to strengthen our supervision of the price to standardize the market," he said,"Supervision of the telecommunications fees will be based on different kinds of telecommunications and give enterprises more independent rights to set prices." Currently, inter-connections between mobile networks are free, but transferring a mobile phone call to a fixed-line incurs a fee. However, some industry sources are skeptical about the one-way mobile service charge as investors seem to be against it.
Regardless of whether the one-way fee is adopted, inter-connection rates are set to change as the MII wants to further standardize the country's telecom industry. The new policy will be based on the cost incurred by telecom operators to connect calls between networks and this could mean rate increases for consumers in some areas.
China banks target public listings overseas(Feb 2, 2004)
The Bank of China and the China Construction Bank, the two largest state-owned banks in China recently announced plans to be publicly listed on overseas stock exchanges.
The China Construction Bank plans to be listed on the Hong Kong and New York bourses in 2004 in an attempt to raise US$10 Billion while the Bank of China plans to list in 2005.
Without doubt, this action is a milestone for the two banks to transform their business operations by improving business transparency, capital flows and economic investment returns. At the end of 2003, the Chinese central government injected US$45 billion of foreign reserves into the two banks, US$22.5 billion a piece, to improve the business performance of the two banks. Overseas listing seems to be an emerging trend for many Chinese companies hoping to gain access to international capital markets.
Trade between Guangdong and France to grow (Feb 2, 2004)
Trade between China’s Guangdong province and France grew 31.7% year-on-year to US$2.98bn, accounting for 21.6% of the total China-France trade according to recent reports.
During the last 10 years (1994-2003), trade between Guangdong and France amounted to US$19.22Bn. Guangdong’s exports to France achieved US$2.11bn. Exported products include handbags, plastic products, toys, handsets, printing equipment, laptops and microwave oven while imports were made up of generators, aircraft, nuclear reactors and core ICs for handsets.
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