IT Sector in Need of Key Technology: Analysis

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Last updated at: (Beijing Time) Thursday, March 28, 2002

IT Sector in Need of Key Technology: Analysis

Improving China's technological level and developing new, core technology are key to sharpening the competitiveness of domestic information industry. Since 2000, the growth of the information industry has slowed down throughout the world. Now there are signs that the semi-conductor industry is recovering. The prosperity of the international information market will push the growth of the Chinese information market.

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Slowdown in information industry

Improving China's technological level and developing new, core technology are key to sharpening the competitiveness of domestic information industry.

Since 2000, the growth of the information industry has slowed down throughout the world. The situation was worsened by the collapse of the web economy, which helped usher in the global economic recession.

Last year, for example, the global semiconductor market slumped by 16 per cent.

Signs of recovering

Now there are signs that the semi-conductor industry is recovering. According to the results of research by the 2002 Index of Silicon Valley, the market is chasing semiconductor stocks, which shows that market support for the industry is increasing.

Backed up by its strong and growing momentum, other related industries are also growing - such as the computer, wireless communication and Internet industries. The number of orders received is increasing and new venture capital is flowing into those industries.

Moreover, the global semiconductor market still has a higher growth rate than the overall global economy.

A new upsurge in the semiconductor market is expected to follow in the wake of fast growth in the market for mobile communications terminal equipment.

It is predicted that the sales volume of semiconductors will be US$216 billion this year, up 11.7 per cent from last year.

International market to push growth of Chinese market

The prosperity of the international information market will push the growth of the Chinese information market.

Since the 1990s, the Chinese mainland's information industry has grown at three times the rate of its gross domestic product (GDP).

It has grown into the largest industry in China and the third-largest in the world.

Many Chinese products have found a niche in the international market.

Chinese electronic components, for example, rank third in the world. Their output value makes up 10.4 per cent of the world total.

Impact of global recession

But, as the world economy slows down, China's information industry cannot escape the impact of the global recession.

Its sales volume last year decreased by 10 per cent year on year. The country's imports of information products also exceeded the amount of exports.

In 2000, the trade deficit of China's information industry was US$13 billion and the figure for 2001 is estimated at US$14.1 billion. This reflects the low self-sufficiency rate in China's information industry.

Take integrated circuits as an example. In 2000, 5 billion integrated-circuit blocks were produced, valued at US$2.5 billion. But the market demand was for over US$20 billion. The gap had to be filled by imports.

This also signifies that the product structure of China's information industry cannot tally with the demands of the changing market.

The manufacture of new types of electronic components, for example, has taken place on a considerable scale. But the quality and added value are still not satisfactory. The restructuring of the industry is still too slow to allow it to catch up with modern international standards.

The growth of Chinese electronic components originated in the Chinese manufacture of semiconductor radio sets in the 1960s. The appearance of TV sets and cassette recorders in the 1980s pushed its development. In the mid-1990s, the consumption of electronic products, led by colour TV sets, saw the further growth of the industry.

But Chinese high-tech products still lag far behind their counterparts on the international market, which feature digital and high-frequency technology, intelligence and multiple functions. Chinese manufacturers have been unable to adjust to the market demand.

Now that China has joined the World Trade Organization, it will be easier for foreign enterprises to enter the Chinese market. To lower the costs of manufacturing, some multinationals have expanded their purchases of Chinese electronic components.

However, Chinese firms' manufacturing capacity and technology levels cannot satisfy their demand.

Therefore, although the Chinese market is continually expanding, domestic manufacturers cannot produce the necessary products for the market.

Lack of core technology

Another problem with China's information industry is its lack of core technology with the corresponding independent intellectual-property rights.

Many key chips utilized in Chinese firms are imported. If Chinese manufacturers do not have the independent intellectual-property right, the long-term interests of the country's information industry will be jeopardized.

The profits from electronic products now come mainly from the core components. Unable to produce their own key components, many Chinese manufacturers have suffered from a decline in profits, which in turn affects technological input and the improvement of their technological levels.

Average investment in technological development by China's top 100 electronic enterprises accounts for 3.6 per cent of their sales volume. But the ratio is more than 10 per cent in the big international electronic groups.

To enhance the competitiveness of China's information industry, restructuring is needed to give priority to the development of core technology.

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