July 27,
2006
China’s
Domestic Component Production Grows
With
China taking a large share of the consumer electronics manufacturing, the
country has become a mammoth components consumer. In 2005, China’s electronic
component appetite hit an estimated $106 billion, or 26 percent of the global
components market, according to Analysis International, a technology
consultancy firm that specializes in the Asia-Pacific Rim. As China developed
its manufacturing base, its manufacturers bought components primarily from
North American, Japanese and European parts producers.
In
recent years, however, domestic Chinese component manufacturers have started to
produce components in large volume. Analysis International estimates that China
produced $39.2 billion worth of electronic components in 2005, with $32.5
billion of those parts getting exported. Most of those exports are going to
other low-cost Asian manufacturing centers.
Recent
trends in the production of components in China include the following
directions: higher frequency, smaller size, energy efficiency, high speed and
power, high-definition and precision, multi-function. Chinese components are
also trending toward RoHS compliance. The one trend that has continued through
China’s emergence as a source of electronic components is the tendency to focus
on high-volume parts. China’s domestic producers manufacture mostly mid- to
low-end products. China’s component producers have aimed for this low-end, high
volume market. For high-tech components, China still imports mostly from producers
in Japan, the United States and Europe.
There
have been a number of concerns about components from China, namely the
knock-offs that mimic brands from Japan, the United States and Europe. While
the United States and other governments have pressured China to end its
intellectual property abuses, there are still plenty of domestically produced
parts that fraudulently appear to be produced by U.S., Japanese and European
parts manufacturers. There is also concern over the quality of domestically produced
Chinese parts, though that concern is tapering off as Chinese components
improve in quality.
European
and U.S. component distributors still see China’s domestic component production
mainly aimed to supply the large contract manufacturers throughout Asia. “We
still see a lot of U.S. and European components moving into China,” says Simon
Whitaker, the regional director – for ASEAN countries at London-based Premier
Farnell, the sister company of Chicago-based Newark InOne. “The components
produced in China are more tuned to the local Taiwan and China manufacturers.”
Whitaker
notes that the manufacturers in Asia are more focused on price and less focused
on brand name, so they more willing to look at domestically produced
components. “They’ll go anywhere that will give them the functionality and the
price,” explains Whitaker. “They are more prepared to take a chance on a Taiwan
or Chinese component. As long as the fit and form are correct, they’ll drive
for the low price.”
As
for Chinese components becoming a factor in the U.S. and European component
markets, Whitaker believes this is only just beginning. U.S and European
manufacturers like the quality and reliability of their own domestic parts
producers. Yet the low prices of Chinese parts will certainly be a factor going
forward. “As far as Chinese components taking market share in the United States
and Europe, I sense they probably are, but that is only in its infancy,” says
Whitaker. “While the United States and Europe manufacturers are happy with the known
brands, there is a bit of product coming in from Asian players. It’s definitely
growing because manufacturers will always look at low prices.”
Quality
is a continuing issue with components made in China. While this factor is
ebbing as the quality of Chinese components improves, it remains a big concern
among manufacturers outside China. “If you want high quality, you’ll pay a
higher price,” says Whitaker. “There are questions about the quality of Chinese
and Taiwanese products.”
Whitaker
notes that when price becomes a large factor, manufacturers are more willing to
take a chance. He believes this factor accounts for the fact that manufacturers
of high volume products are willing to look at components produced in China,
while those manufacturers producing smaller quantity products are more
interested in sticking with European and U.S. component producers.
RoHS
compliance is also a concern when it comes to Chinese components. There have
been reports from distributors that some Chinese component manufacturers have
passed off non-compliant parts as RoHS compliant. This may change, though, as
China’s versions of RoHS goes into effect in March of 2007.
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