Agilent eyes China for expansion
By Chang Tianle (China Business Weekly)
Updated: 2004-03-03 14:02

Already the world's largest mobile phone market and the second largest personal computer market, China is showing no signs of letting up.

In turn, semiconductor companies are looking to China for expansion.

"China is a significant and growing part of Agilent's semiconductor business, and we've decided to aggressively invest in its high-growth mobile and consumer markets," said Young Sohn, president of Agilent's Semiconductor Products Group.

Strong consumer demand drove global semiconductor sales up 18 per cent to US$166.4 billion last year. Improved corporate earnings are expected to fuel the semiconductor industry in 2004, boosting it by another 19 per cent.

The industry's growth cycle will peak in 2005, when 13 per cent growth is expected, according to Agilent's Sohn, citing World Semiconductor Trade Statistics.

China's semiconductor market has the fastest growth rate in the world with 25 per cent annual growth.

The Ministry of Information Industry's statistics show that China had 268.7 million mobile phone users in 2003, which is expected to hit 320 million this year.

As people are pursuing more functions and better-looking models, they change their cellphones frequently.

By using the semiconductor technology improvements, mobile phone makers will be able to make their phones more attractive and less costly.

Sohn estimates that China will account for 15 per cent of the world's semiconductor consumption by 2007, from the current 10 per cent, which indicates a market share of up to US$40 billion.

STMicroelectronics is even more optimistic. Its Vice-President, Alain Dutheil, told February's annual Industry Strategy Symposium-Europe that China will be the world's largest semiconductor market by 2008.

He predicted that China will have a 35-per-cent share of the semiconductor market to US$100 billion, saying many electronics companies are moving or have already relocated to low-cost regions, particularly China.

China and other parts of the Asia-Pacific region combined to take 58 per cent of all microelectronics investment last year, he added.

For Agilent, 25 per cent of its US$1.6 billion semiconductor sales are generated in China.

It will also increase its manufacturing capability. Sohn confirmed Agilent's US$100 million investment plan in China, which may increase in the future.

Research group IDC said Internet protocol houses and fabless wired communication chip suppliers will experience the most visible shakeup in China, while flash memory, analog and wireless semiconductor vendors will consolidate.

Agilent's China strategy is to drive innovative solutions tailored to the local market, focusing first on the fast growing mobile phone market and the consumer electronics market.

Sohn noted that as the Chinese market is growing, many global players are shifting here, while the number of domestic handset makers is also growing at an astonishing speed.

So far, Agilent's top six customers are all foreign names such as LG, Motorola and Nokia. Sohn expects the list will include Chinese companies soon.

Now, Agilent is providing components to major Chinese mobile manufacturers such as Bird and TCL.

"We expect our head count in China to approach 1,000 in the next five years," Sohn added.

As part of its efforts, Agilent opened the Agilent Semiconductor Solutions Centre (ASSC) in February to serve the fast-growing mobile handset and consumer markets in China.

It also announced a new wholly owned subsidiary, Agilent Technologies Trading (Shanghai) Co Ltd, to develop a supply chain for its local manufacturing customers.

Sohn hopes the new ventures will drive Agilent's sales in China to US$1 billion in 2007.

The ASSC aims to develop semiconductor solutions and accelerate product development for original equipment manufacturers, original design manufacturers and mobile handset manufacturers in China.

It will initially focus on building mobile-technology research and development, engineering and service capabilities and is expected to expand its focus to storage, computing, networking and optoelectronics solutions.

Calvin Chen, head of ASSC, said the centre's workforce will grow from the current dozen to 100 by the end of the year.

Sohn said Agilent will also participate in China's new standard creation, such as the TD-SCDMA 3G mobile standard and the EVD digital standard.

Wayne Chan, vice-president and general manager of Agilent Greater China, said: "With the establishment of the ASSC and the trading company, Agilent's strategic investment in China now includes a full range of businesses and benefits for our customers across the communications, electronics, life science and chemical analysis industries."

Agilent already has a global manufacturing centre in Shanghai and seven offices throughout the country.

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