Guessing game for tech giants

  • Business
  • Tuesday, 24 Feb 2004

HONG KONG: China’s ever changing technology priorities are a high-stakes gamble for many of the world’s top chipmakers, most of which have found the odds stacked against them as they try to guess Beijing’s agenda.  

A lack of transparency by China’s economic planners, and the manufacturers connected to them, is exacerbating problems for multinationals in planning their investments.  

“In general, the trend is for everyone to look at China as a huge opportunity,” said Mario Morales, vice-president of semiconductor research at consultant International Data Corp.  

“But there’s also a lot of risk that people aren’t viewing very carefully,” he added. “Over 70% of the companies that I talk to in the semiconductor business in China are still not making money in China.”  

A Chinese worker checks mobile phone circuit boards in Shanghai. - APpic

China’s telecoms boom has brought profits but also headaches for makers of chips used for ADSL (asymmetric digital subscriber line), a technology allowing conventional copper phone lines to carry data-rich broadband signals.  

In its zeal to build up broadband infrastructure, China has let its top two fixed-line phone companies, China Telecom Corp and China Netcom, spend hundreds of millions of dollars to build up their ADSL networks. The number of broadband subscribers in China has grown from fewer than one million at the end of 2001 to about 10 million at the end of last year, with an estimated 70%-80% of those on ADSL, according to Zhang Xingsheng, chief executive of ADSL software maker AsiaInfo Holdings Inc.  

And the number is expected to keep growing to 25 million or more by the end of next year.  

The breakneck growth is bringing new business but has also created some shortages for semiconductor giant Texas Instruments Inc (TI), which makes chips used in ADSL systems. “There are some constraints in a few isolated areas where market growth and demand have been high,” said TI spokesman Desmond Wong.  

At the other end of the spectrum, semiconductor giant Motorola Inc stands out as an example of a company that guessed wrong, betting on the auto and white goods sectors which had appeared to be in favour with economic planners in Beijing.  

Last month, Motorola, which has invested US$3.4bil in China to date, agreed to sell a US$1bil chip foundry it built in the northern city of Tianjin to Semiconductor Manufacturing International Corp (SMIC).  

The plant – originally designed to make microcontrollers used in cars and home appliances – has lain largely dormant the late 1990s.  

Germany’s Siemens AG and computer giant IBM Corp are betting on two new – and largely unproven – technologies now being promoted by Chinese central authorities.  

Siemens has invested more than 170 million euros (US$215.6mil) to date in TD-SCDMA, a homegrown Chinese wireless phone standard being strongly promoted by government officials.  

IBM, meanwhile, is producing central processing units (CPUs) – the brains at the heart of each PC – preloaded with the “open source” Linux operating system for Hong Kong-based Culturecom Holdings.  

China has promoted such chips as an alternative to costly Wintel computers that use Intel CPUs running Microsoft Corp’s Windows. But such systems have been slow to catch on. – Reuters

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