Inland interchange

Updated: 2011-02-18 14:17

By Meng Jing (China Daily European Weekly)

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Foxconn Technology Group, Quanta Corporation, and Inventec Corporation, three major high-tech product manufacturers, are also planning to open factories with a total annual production capacity of 80 million PC units in Chongqing's Xiyong Micro-electronics Industrial Park, where HP is located.

Zhang Bing, vice-president of the park, says the success of manufacturers in eastern and southern China lies in its cheap labor and duty-free policies.

"However, more companies are finding it difficult to survive, due to rising labor and energy costs," he says, adding that it is a matter of time before those companies head west.

Inland interchange

Chongqing Xiyong Comprehensive Bonded Zone, the largest duty-free zone in the inland area which is included in the 37-sq-km park, passed the central government's standards in November 2010 and has started operations since.

About 1 million units of PC have been exported from the duty-free zone to overseas markets since the first one rolled off the production line in January 2010.

According to the recently announced Chongqing government's 12th Five-Year Plan (2011-2015), the area will grow its IT industry into a 1-trillion-yuan operation by 2015, accounting for 40 percent of the city's total industry size of 2.5 trillion yuan.

As part of efforts to boost the city's transportation and logistics sectors, a second airport runway stretching 3,600 meters started operations in December 2010, making Chongqing's Jiangbei (International) Airport the only inland airport with two runways and two terminals. The construction of a third runway will break ground this year - the 3,800-meter long runway will be able to accommodate an Airbus 380.

A direct air cargo service between Chongqing and the Belgian city of Liege was also launched in September 2010 and the move is expected to help build closer ties between the fast-growing high-tech production center of Chongqing and the important electronics consumer market in Europe.

But starting an industry from scratch has its own problems, particularly in the supply chain.

"The transition period is the most difficult," says Frank Chien, manager of Inventec Chongqing Company, a Taiwan-based manufacturer, which expanded its manufacturing center from Shanghai to Chongqing in 2010.

"The cost of production is $4 per unit, higher than those produced in our Shanghai base, as 95 percent of our material needs to be transported from the east," he says.

There are about 3,000 raw material suppliers in the Kunshan comprehensive bonded zone, in coastal Jiangsu province, supporting an annual production capacity of 70 million PCs. The number of raw material suppliers is less than 200 in Chongqing.

"We still have a long way to go before we hit our goal of an annual production capacity of 100 million PCs by 2015," says Zhang Bing.

Analysts in IT industry say the supply chain will not be a problem in another two to three years as more companies from the coastal cities head to the west due to growing consumption power and the huge market there.

Wang Jiping, research manager of IDC China computing system, says the next consumer market for PCs will be in western China. The annual growth of western China's demand for PCs will reach 21 percent by 2014, he says, thanks to rising incomes.

Chongqing's special status as a municipality, which is headed by the central government directly, is another selling point for winning over investors.

"There are fewer layers of government to get to, therefore the system is less bureaucratic and government departments are easier to access," says Shikha Tiwari.


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