Thu, Dec 23, 2010 - Page 12 News List

Migration west poses challenges

By Jason Tan  /  Staff reporter

A man walks down an alleyway on Saturday in Chongqing, China. China’s National Development and Reform Commission has approved a plan to develop the Chinese cities of Chengdu and Chongqing, the China Business News reported yesterday, citing the deputy chief of the commission’s Sichuan branch.

PHOTO: BLOOMBERG

Despite Taiwanese PC makers’ aggressive deployment of facilities in Chongqing and Chengdu, whether western China will be able to replicate the success of southeastern China — currently the world’s largest base for producing laptops — remains to be seen, Market Intelligence & Consulting Institute (MIC, 產業情報研究所) said yesterday.

Looming challenges include the readiness of component makers to follow suit as well as the achievement of better yield rates from these new production sites, MIC analyst Chris Wei (魏傳虔) told a forum.

“Component makers are worried about costs, including transportation, unless western China is able to produce at least 20 percent of total notebooks,” he said.

Only 6 percent of portable PCs are expected to come from western Chinese cities next year, while southeastern cities including Kunshan and Changsu of Jiangsu Province, as well as Shenzhen of Guangdong Province, will still take up the bulk of the production, according to MIC’s surveys.

If economies of scale in the west do not kick in, Taiwanese firms that make components ranging from panels and chips to sensors will be reluctant to invest there, Wei said.

US PC giant Hewlett-Packard Co was one of the first PC firms to set up a base in Chongqing. That was followed by Taiwanese notebook contract makers Hon Hai Precision Industry Co (鴻海精密), Quanta Computer Inc (廣達電腦) and Inventec Corp (英業達).

Compal Electronics Inc (仁寶電腦) and Wistron Corp (緯創) are currently evaluating Chengdu as their new production location.

The world’s No. 3 PC brand, Acer Inc (宏碁), meanwhile, is launching its second Chinese operational hub in Chongqing in the first quarter to expand its service network for consumers in western China.

“Setting up offices in -Chongqing came following the incentives offered by the provincial government. However, we are still watching to see if contract makers are able to churn out products with stable yield rates in the western sites, or else we would request the orders to be produced in the southeast,” said an Acer source, who asked to remain anonymous.

Meanwhile, Wei said: “One year is considered rapid for a site’s -operation to be in full swing, not to mention it will have to watch out for the yield rate issue.”

On a related note, the Taipei-based researcher said that next year, Quanta would continue to be the world’s largest contract maker of notebooks including tablets, by commanding a 22.4 percent market share, while Compal would come in second at 20.1 percent.

Hon Hai would take the No. 3 spot, with an 18.4 percent share next year, as it is winning clients with slashed costs and its strong capability in component production, MIC added.

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