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Will China Become the Dominant Asian Market?
Market? By Rob Spiegel, Electronic News -- 8/9/01
2:51:00 PM Electronic News
Most experts in distribution agree China will be
the fastest growing market over the next five years.
Some believe it will come to overshadow Japan as
it grows. One distribution chief executive even
stated that China will eventually come to dominate
the World in electronics manufacturing.
“China is all of Europe and the U.S. put
together times two,” said Angus Fraser, chief executive officer
of Farnell from a hotel room in Shanghai this week.Farnell is part of the Wetherby,
U.K.-based Premier Farnell. “China is going to be an unbelievably important market.”
There are a number of reasons China is expected to grow at a fast pace over
the next few years. For one, the country is home to a quarter of the world’s
population. Secondly, it has become an inexpensive location for manufacturing,
and thirdly, the government is becoming more and more accommodating to global
business.
“The government here is totally committed to moving toward the affluent gains that can
be had by aligning with the west,” Fraser said. “They’re working with the prosperity of the
west to raise the standard of living for everyone.”
Though some view China’s government as problematic, it has become more open to the
development by global companies than Japan.“China will become more accommodating
to U.S. businesses than Japan has been,” said George Perris, founder and president of
Sierra Marketing of Rocklin, Calif. “Once you get a change of government in China, there
will be a big change in doing business.”With Japan’s reluctance to import foreign goods,
many believe China will eclipse Japan as the dominant Asian market.
“China is as important if not more important than Japan,” Perris said. “There’s no question
China will dominate Asia. Japan will someday look over its shoulder and see China gobbling
up all of Asia’s resources.”
Others agreed China is headed toward becoming the largest market in Asia.
“Unquestionably China will become the dominate market in Asia,” said Scott Leichtling,
vice president of national and global accounts at the Chicago,Ill.-based Newark Electronics,
a Premier Farnell company. “The labor source alone is mind-boggling. I do think it will
surpass Japan.”
A cheap source for high-quality labor Part of the rational for viewing China as an
important market is that it has become the next major production location in the
evolution of electronics manufacturing in Asia.
“Japan was a low-cost producer 20 or 30 years ago,” explained Fraser.
“Then Taiwan became the location of high-quality low-cost production,
then Malaysia.Now manufacturers are targeting China in their relentless
pursuit of the lowestcost country. I’ve just been to the Motorola factory
outside Beijing that cost $1.5 billion to build.” Distributors have responded
to China’s growing potential by opening offices and investing in Chinese
companies.
“With Avnet’s purchase of Sunrise (Electronics) and Arrow’s moves, it’s clear they
see it as an important market,” said Rob Damron, analyst at Tucker Anthony Sutro
Capital Markets in Milwaukee, Wis. “They’ll continue to look for acquisitions or
partnerships in order to gain market share in China.”
Premier Farnell is also moving more into China with R&D and MRO goods from both
Farnell and Newark Electronics.“Premier Farnell has formed some close relationships
with global companies, and we’re constantly looking at where they are going to
manufacture their products,”Leichtling said. “A number of them are building their
plants in China.”
What about China’s political climate?In the past, companies worried about the human rights
issues in China.
Now executives expressed confidence that China is overcoming its rough past.
“There are a lot of stabilizing influences in China,” Fraser said. “Economically, they don’t want
to gamble. Working with the prosperity of the West will give benefits to China.”
Fraser noted he can already see the benefits from the growth
of global manufacturing in China.
“The average person is already benefiting,” he said.
“China is nothing like you see in the media. It’s stunning. I just flew into
Shanghai this evening and it’s as if
you’re in downtown Los Angeles.”
Leichtling pointed to two paths of development in China, one domestic and the other coming from
companies outside China.“There are Chinese companies in manufacturing that we’re becoming
aware of, but just as importantly, U.S. and European companies have opened up manufacturing
in China. And as they open their plants, distribution will follow.”
Even though China is bustling with manufacturing development, Leichtling noted the country hasn’t
fully developed its infrastructure, which has become a challenge to distributors. “In terms of
infrastructure, China is probably behind Mexico and Brazil. Getting products to their plants is critical,
but they just don’t have Fed Ex on I 85. Many of their manufacturing plants are on dirt roads.”
Fraser, however, expressed optimism at China’s ability to put infrastructure in place quickly.
“The government is totally behind building. They’re putting $2 billion into a new railway system
and $2 billion into a new road system. They’re driven.”
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