Electronic Telecommunication Components in China|
Overview of the Telecom Industry
Guangdong Province leads the development of China's telecom industry. Although Guangdong generated an impressive 12% of China's GDP in 2009, its telecom industry generated a whopping 16% of national telecommunication tariffs.
- Guangdong's major telecom business revenue reached $17.95 billion
- Guangdong's mobile phone users reached 89.51 million, 13% of the national total
- Guangdong's fixed phone users reached 35.73 million, 10% of the national total
- Guangdong's internet subscribers reached 45.54 million, 15% of the national total. Over 40% regularly surf the internet via their cellular phones.
In addition to the three basic telecom carriers, there are over 20,000 value-added telecommunications service providers in China, and 5,328 of them are located in Guangdong. They provide all kinds of services based on telecommunications networks, such as VAN, VPN, internet, email, online database search, call centers, EDI, e-fax, etc.
Opportunities in the 3G Deployment Campaign
China finished restructuring its state-run telecom industry in 2008 and in January 2009 issued the long-awaited 3G licenses to the three newly restructured telecom carries: China Mobile, China Unicom, and China Telecom. That year, China invested $23.74 billion to build out its 3G networks.
Additional procurement decisions for 3G equipment will be made by the three telecom carriers' headquarters in Beijing. It is estimated that the carriers will spend about $50 billion on 3G network infrastructure in the next 3 years. It is estimated that over 18,000 base stations will be built in Guangdong Province alone, with an estimated investment of $2.63 billion.
Major domestic telecom manufacturers like Huawei, ZTE, and Datang will account for the highest market share in the construction of the 3G networks. Huawei and ZTE are the top two telecom equipment manufacturers in China, and both are based in Shenzhen, Guangdong Province. Contracts for building 75% of the 3G network's infrastructure have been given to ZTE, Huawei, Datang and their joint venture affiliates.
Foreign companies are probably not in a position of advantage when competing with Chinese companies in 3G network construction. However, Chinese telecom manufacturers source a lot of electronic components and technologies from outside China, such as automatic data processing machines and units, storage units, digital automatic data processing machines, semiconductor devices, wafers, electronic integrated circuits, flat panel displays, digital program-controlled switching apparatus, radio navigational aid apparatus and remote control apparatus. Manufacture of such components presents abundant opportunities for U.S. firms to get involved in China's 3G campaign.
Firms related to information technologies such as semiconductors, co-processors and software have expanded into China, but the international dominance of American firms does not yet extend to a growing China market. However, the rapid developments of microprocessors and network software means that these new markets are offering potential for growth.
Estimates of Pirated Software: Over 90%
Operating Systems Based on Linux: About 15%
Operating Systems Based on Windows: About 85%
Software Market Windows leads the operating systems market with Windows 2000, though Linux-based software has made significant inroads. Besides the increased sales of licensed software in the past year due to Y2K compliance purchases, Chinese users appear to be seeking more reliable service offered by licensed products. Replacement of non-compliant software with newly licensed Y2K ready software and with the better service offered by foreign vendors has increased imports. In the past year, Microsoft announced an 83% increase in China revenues.
Intellectual Property Rights (IPR) The market for licensed software is nonetheless slow in developing. Many Chinese individuals and enterprises are unwilling to pay for licensed software due to financial constraints, the perception that software has no value, and the widespread availability of cheap, pirated software. Government policy and practices may be changing. Chinese companies involved in research, banking, and technology are less willing to purchase pirated software. Currently, pirated software is estimated to comprise over 90% of the market. Chinese companies and software engineers also often see their own software fall victim to IPR violations, which is increasing the pressure for better protection. The long-term solution against piracy lies in mobilizing domestic firms to take the lead in IPR protection.
Semiconductors and Components Chinese manufacturers currently face a lack of technical know-how. China supports the entrance of foreign firms into the semiconductor and components manufacturing markets, but continuing problems with IPR and difficulties in creating wholly-owned foreign ventures or foreign-controlled joint ventures represent significant barriers to entry. Over 90% of U.S. electronic components used in China are purchased in Hong Kong and brought across the border in Guangdong.
Export Controls Encrypted software products require export licenses from the either the U.S. Department of Commerce or the State Department. The latest generation of computer microprocessors are so powerful that a single chip powering a personal use PC is almost powerful enough to be rated a High Performance Computer (HPC). HPC's, often called Supercomputers, are subject to more stringent controls.