1. Worldwide Outsourcing Trend and China’s Electronics Industry
Presented by:
Dr. Chan Kei Biu
Chairman
Hong Kong Electronic Industries Association
22 September 2004

2. Worldwide Electronics Manufacturing and Outsourcing Overview
TABLE OF CONTENT
Worldwide Electronics Manufacturing and Outsourcing Overview
Electronics Industry in China
The Pan-Pearl River Delta in China
Competitiveness of the Pearl River Delta

3. WORLDWIDE ELECTRONICS ASSEMBLY INDUSRY
Source: Electronic Trend Publication, published in Manufacturing Market Insider, July 2004

4. ELECTRONICS INDUSTRY’S GROWTH
2004
2005
2006
2007
2008
CAGR
EMS+ODM
12.5%
11.7%
12.0%
11.2%
11.8%
Electronics Assembly total
10.8%
-2.3%
6.5%
8.3%
8.1%
6.2%
Source: Electronic Trend Publication, published in Manufacturing Market Insider, July 2004

5. OUTSOURCING PENETRATION
EMS Penetration
ODM Penetration
Combined Penetration
2002
2007
Peripherals
21%
17%
13%
23%
41%
Wired Telecom
18%
36% 2% 5%
Wireless Telecom 8%
Computer Systems
10%
11%
32%
Automotive 9%
Consumer Electronics 4% 6% 3%
12%
Source: Technology Forecasters, Q4 2003

6. REASONS FOR INCREASE IN OUTSOURCING
More cost effective
Efficiency and flexibility
Better risk management model – able to cope with volatility
Less capital investment
EMS – more advanced technology and equipment
OEM adaptation of HP and Dell model

7. OBSERVATIONS – THE GLOBAL TREND
More ODM
More outsourcing moving to China
More Box Build
Technology towards Chip-scale packaging

8. CHINA LEADS IN EMS
Source: iSuppli, June 2003

9. WHY CHINA? Lower cost structure – land, workers and engineers
Already attained world class quality
Local component supply chain
Flexibility
Opportunities in huge domestic market

10. Electronics Industry in China

11. CHINA’S ELECTRONICS INDUSTRY IN 2003
US$ billion
Growth
Sales Volume
226.5
34%
Electronics Production　
Million Unit
Mobile Phone
186
55%
Color TV set 65
39%
Micro-computer 32
98%
Computer Monitor 73
56%
Color Tube 91
16%
Source: Ministry of Information Industry of China

12. CHINA THE PAN-PEARL RIVER DELTA (PPRD) AND OTHER VITAL ECONOMIC AREAS
Boahai Economic Zone
Yangtze River Delta
CHINA
Pan-Pearl River Delta

13. 2003 GDP OF THE PAN-PEARL RIVER DELTA
GDP (US$B)
Annual GDP growth
Population (M)
Guangdong 廣東
162.0
13.6%
75.9
Hong Kong 香港
158.3
-2%
6.8
Other 8 provinces + Macau
313.9
11.3%
326.2
Total
634.2
7.6%
408.9
Korea
605.3
6.2%
47.9
Taiwan
528.6
3.5%
21.5
Source: China Statistics Bureau, Hong Kong Census & Statistics Dept, Macau Statistics and Census Service, World Bank, CIA World Factbook

14. INDUSTRIAL STRUCTURE OF THE PEARL RIVER DELTA IN 2002
* Rounded figures
Source: Guangdong Statistical Yearbook
Electronics and electric equipment manufacturing shared
40% of the total industrial output!

15. Competitiveness of the Pearl River Delta

16. COMPETIVENESS OF THE PRD
Efficient and established infrastructure – transportation and communication
Full range of component manufacturers and technical support
Clustering of suppliers – JIT operation
High concentration of OEM customers
High quality, flexibility and fast response
24/7/365 operation
On-demand mode

17. HONG KONG-PLUS MODEL Gateway to China: Sound tax and legal systems
Sizeable equity market
Efficient government with no corruption
Understand both international and Chinese cultures
Fast response
Strong business integrity

18. China is now factory of the world!
SUMMARY
China is now factory of the world!