Chinese electronic component sector solidifies competitiveness amid external pressure

(Illustration: Liu Xidan/GT)

Prominent domestic and foreign financial institutions, such as the China International Capital Corp, BlackRock, and Citigroup, have been conducting research on Chinese electronic component companies, including Luxshare Precision, Anker Innovations, and Crystal Optoelectronics, according to a report by the Securities Times on Tuesday. It added that several listed companies believe that despite ongoing external disturbances, the true determinants of a company's ability to weather economic cycles are its core competitiveness and global operational capabilities.

This trend not only underscores the continued interest and focus of investment institutions on China's electronic component sector but also emphasizes the resilience of the Chinese industrial chain in the face of global complexities.

Electronic components are the backbone of numerous electronic devices, determining their performance and quality. With the growing integration of industrialization and informatization, electronic components have permeated every industrial sector, serving as the cornerstone and driving the innovation and development of the entire industry.

Electronic components are widely applied across various industries. Taking multilayer ceramic capacitors as an example, on average, each smartphone contains more than 1,000 units, each communication base station uses more than 6,000 units, and each new-energy vehicle is equipped with more than 10,000 units.

Over decades of development, China has established the largest electronic component industrial system in the world in terms of both production and sales. China's electronic component industry has a comprehensive range of categories, and the industrial chain has been initially perfected, according to the 14th Five-Year Plan (2021-25) for China's electronic component industry, published by the China Electronic Components Association in September 2021.

Given its status as the world's foremost hub for the production and sale of electronic components, it's unsurprising that China's electronic component sector has caught the eye of investors. Currently, although the US frequently wields the tariff stick, which presents challenges to the global industrial chain, several factors continue to bolster the inherent growth potential of China's electronic component industry in the face of ever-changing external conditions.

First, there has been a sustained increase in research and development (R&D) investment. According to the 14th Five-Year Plan (2021-25) for China's electronic component industry, during the 13th Five-Year Plan period (2016-20), the top 100 companies in the electronic component industry saw their R&D intensity increase from 3.54 percent in 2015 to 4.19 percent in 2020. This year, the goal is for R&D spending to reach 5 percent of each company's main business revenue.

Second, the domestic market holds significant potential. Thanks to the rapid development of China's industrial sectors, such as new-energy vehicles and medical electronic devices, the high-end domestic market for China's electronic component industry is poised for further expansion. This expansion provides the essential market conditions needed for the continuous development and upscale transformation of China's electronic component industry.

Third, Chinese firms are proactively adapting to shifts in the global market. As reported by the Securities Times, Chinese enterprise Anker Innovations has declared its intention to maintain pace in the development of new product lines. By consistently enhancing their competitive edge, notably through the introduction of innovative products, the inherent dynamism of companies in China's electronic component sector is set to receive an additional boost.

The development of China's electronic component sector is driven by a combination of factors, including but not limited to strengths in R&D, market dynamics, and corporate strategies. These factors collectively create a robust internal momentum that supports the industry in facing external challenges.

Data from the China Electronic Components Association showed that in the first quarter, the total trade of China's electronic component products sector increased by 7.53 percent year-on-year. This included exports of $38.226 billion, an 11.97 percent year-on-year increase.

Certainly, there are areas where China's electronic component industry falls short, especially in cutting-edge sectors, where it still lags behind the world's leading companies. However, as long as Chinese firms continue to focus on enhancing their core competitiveness in the face of external pressures, along with other factors, the potential of China's electronic component sector could further expand.

The author is a reporter with the Global Times.