Author: CHUNG Yoon Ngan
Date: 05-07-12 07:59
Silicon Valley of the East
By Liu Lu, Li Yu
May 4, 2012 - 10:17am http://www.chinadailyapac.com
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Chengdu aims to become a major information technology industrial base. Sales revenue from the city’s IT industry reached 301.9 billion yuan ($47.8 billion) last year, a year-on-year growth of 63.8 percent, and is expected to touch
When more than 500 global CEOs and world leaders arrive next year for the prestigious world business summit, the Fortune Global Forum, it will be the final step for Chengdu towards its aspired transformation into the “Silicon Valley of the East”.
Long overshadowed by industrial powerhouses like Guangzhou and Shenzhen, Chengdu’s earlier claim to fame was tourism, a pleasant lifestyle and of course, its giant pandas.
But in the last decade, there has been a sea change. The capital of Sichuan province in southwestern China has made rapid strides in the information technology (IT) sector. This has led to Chengdu becoming the choice manufacturing destination for multinational corporations such as Intel, Apple and Dell.
“Nearly 70 percent of Apple’s tablet computers are made in Chengdu while more than 50 percent of the world’s notebooks run on chips made in Chengdu,” says Ge Honglin, the mayor of the city.
With a host of policies aimed at attracting more investment in the IT sector, Chengdu is now looking to be an integral link in the global IT industrial chain.
According to the Chengdu Economic and Information Committee, in 2011, sales revenue from the primary operations of Chengdu’s software and IT enterprises reached 301.9 billion yuan ($47.8 billion), up 63.8 percent year on year. By 2015, the revenue from the sector is expected to reach 1 trillion yuan.
“It is an opportune time to develop Chengdu’s IT industry, as many enterprises in the eastern regions are migrating inland due to rising labor costs. The government’s go-west strategy gives further impetus to our plans,” Ge says.
There are more than 1,400 IT companies in Chengdu, including some global majors, points out Chen Fu, deputy director of Chengdu Investment Promotion Commission. By the end of March, about 210 Fortune 500 companies had branches in Chengdu, mostly in IT and related businesses.
“These major players have acted as the bellwether in the overall development of the IT industry in Chengdu,” Chen says.
There are also several domestic IT majors such as Lenovo, which has played a key role in Chengdu’s rise to prominence.
Last year, the company’s Lenovo (Western) Industrial Base started production in Chengdu. The base combines the research and development (R&D), manufacturing and sales operations of Lenovo. Currently, it makes desktops and laptops but later will encompass all Lenovo products.
“The new base will optimize our global supply chain, R&D as well as sales system, and will be an important step in our global strategic layout,” says Liu Jun, Lenovo’s senior vice-president.
In addition to boosting Lenovo’s production capacity, the new base, with investment of more than $100 million, will also serve as one of Lenovo’s key mobile Internet R&D centers, focusing on sectors like mobile Internet services and applications.
“The products developed and manufactured in the new industrial base will enhance the company’s leading position in the global markets,” Liu says, adding that the company attaches great importance to the IT market in Chengdu and plans to increase its investments.
“We believe Chengdu was the right choice to build the base because the city provides good logistics services, human resources and government policy support.”
Not surprisingly, it is also these very reasons that have attracted several global companies to Chengdu.
US chipmaker Texas Instruments (TI) is one such company that has in the last few years made considerable advances in Chengdu.
In October 2010, TI set up a manufacturing unit in Chengdu with an initial investment of $275 million. The unit is the company’s first and only production plant in China.
More importantly, TI’s Chengdu facility was one of the first units in China to use advanced technologies for semiconductor manufacture. In other words, it was the beginning of the high-tech industrial transformation of Chengdu.
“The Chengdu unit was one of the major initiatives charted by TI to boost global production capacity,” says Xie Bing, TI’s general manager for Greater China, who adds that the unit complements the company’s existing analog wafer production capacity.
“By locating the unit in Chengdu, TI has been able to move its manufacturing resources closer to the growing customer base in China. It also helps the company to better serve the customers in western China,” Xie says.
The real essence of the TI strategy, Xie says, is the chip major’s determination and commitment to long-term investment and development in China.
The real trump card of Chengdu, according to Xie and many other global companies, is the abundant talent pool.
As a major center for science and technology in China, Chengdu is home to more than 63 institutions of higher learning and secondary technical schools. It has more than 2,700 scientific research and development organizations and over 490,000 researchers.
With its strategic location, Chengdu is also uniquely positioned to capitalize on the go-west strategy.
“Chengdu has been fostering entrepreneurship among high-end technical personnel, especially those with multinational IT company backgrounds,” says Tang Jiqiang, director of the strategic development planning bureau of the Chengdu High-Tech Industrial Development Zone.
Tang says 80 percent of the 1,700 technology enterprises in the city’s high-tech zone are IT companies, with the proportion of companies founded by returning overseas entrepreneurs steadily growing.
According to Chengdu’s Five-Year Plan (2011-15), the city intends to become a major IT industrial base by 2015.
To achieve the goal, Chen says Chengdu has to optimize the development mode of its IT industry and vigorously develop the high-end products and services in the industrial chain.
“It is not the original equipment manufacturers or the big businesses that will drive Chengdu’s IT growth,” Chen says. “Efforts should be made to attract more investment in the new and emerging IT technologies.”
No one doubts Chengdu’s ability to attract foreign investment.
“Obviously, the IT industry is an integral part of a city’s development,” says Andy Serwer, managing editor of US-based Fortune magazine. “When one company comes and feels it is comfortable and successful in a place, other companies will follow suit. We have just seen this taking place in Chengdu.
“You can’t imagine 20 years ago what Chengdu’s IT industry looked like compared to what it looks like today.
“I am looking forward to seeing what Chengdu’s IT sector will look like 20 years from now.”
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