Thank You and Good Night

Travelling the Silicon Road

HONG KONG — Boy oh boy, what a place to end a month-long Chinese sojourn. I arrived here this afternoon; the sun is setting on my last night in China.

But then Hong Kong isn’t really China, in the same sense that San Francisco isn’t really the United States. It’s in the United States, but it isn’t an American city. Just like no country can really claim its bustling port cities as their own, it’s clear even after just a few hours that Hong Kong is a unique place. Hong Kong isn’t Chinese, it’s Hong Kong.

There is every flavor of human being here; a true international city if there ever was one. And it’s a shame I will only be spending about 24 hours here. Of course, one could get into a lot of trouble in a place like this in only 24 hours, and normally I would be more than willing.

But it is a rather bemused and bittersweet feeling I have at the moment. Like I said previously, I feel like the task of unraveling this fascinating, wonderful land has only just begun. It’s true that I’ve had enough business travel to last me awhile, and after wandering the streets of Hong Kong for a few hours, I can’t help but long for the solitude and wide open space that will greet me when I return home later next week.

And Lord so help me, I think I would consider murder in cold blood if I thought it would get me a decent burrito a few hours sooner.

Nevertheless, all things considered, if I had the opportunity and the world were a different place, I’d stay. For how long, I don’t know. As long as I want to, I suppose. If Reed Business were to offer me a correspondent position in China, and they said I could live where I want to, I’d take it in heart beat. If they said I had to live in Beijing or Shanghai, I’d have to think about it for awhile — not very long, likely — and the answer would probably be yes.

I’m not saying I want to spend the rest of my life here — there is that whole free speech thing, I have issues with — but then I can’t say that about anywhere, really. Not even Ireland, which is the only other foreign place to tug at my heart strings like China has. But for a time. …

Anyway, I was a day late arriving in Hong Kong, where I was scheduled to spend the weekend before returning back to the States, with only a day to spare on my visa. Why did I skip an extra day in Hong Kong to remain an extra day in Shenzhen?

Well, Dear Gentle Readers, you don’t get to hear that part of the story. Suffice it to say, my soul longs to return to Gulang Yu or Beijing, and I have no doubt left my stomach in Chengdu, probably for all-time (although I haven’t been to Italy or Thailand — yet). But just when I thought I was going to escape a month in China relatively unscathed, it turns out that I’ll be leaving a little piece of my heart in Shenzhen. A tiny piece, but a piece nonetheless.

And for those of you that know Shenzhen, get your minds out of the gutter, it’s not what you think; I’m not talking about any of Shenzhen’s legendary working girls. No, Ali … she is anything but that.

I even thought about staying tonight in Shenzhen and getting up early and going straight to the Hong Kong airport. But I figured that, even though I have no interviews or appointments in Hong Kong, it was still part of my job to come here and experience it. And it’s a good thing I did, because it took hours to travel the 30 some kilometers from downtown Shenzhen to downtown Hong Kong.

This brings us all the way back around full circle to the subject at hand, finding out the truth of China.

But that will have to wait until next week. After all, it is Saturday night, and I am in Hong Kong. I’m not that bemused.

Electronic News Travels to ChinaWhat, you thought this was it? Oh no, the voyage down the Silicon Road will continue long after I’ve returned to the States. There are more stories to write about China, and more blog topics, like the long list of people I want to thank.

Why for heaven’s sake, we haven’t even gotten yet to what I know many Westerners want to know about: public restrooms and pit toilets. How could you think we were done?

Stay tuned.

Jeff

Editor’s Note: As explained at length elsewhere on this site, this is a blog entry of mine that originally appeared on the now-defunct Electronic News’ website, which is long gone. While its former sister pub Electronic Design News (EDN) currently holds the copyright to all Electronic News copy (to the best of my knowledge), as far as I know, this blog content isn’t hosted anywhere else on the Internet, hence my reproduction here.

Original Comments

at 11/7/2005 7:36:42 AM, PeteF said:

I’ve enjoyed this series very much. As a student of Chinese history I envy your opportunity to visit there. And I must compliment you; you were not an ugly american. You are a real traveler. I’m going to be looking forward to more of your work. The writing is quick, entertaining and insightful. You done good boy!

at 11/7/2005 12:37:29 PM, Wayne V said:

Jeff, just a short note to tell you how much I have enjoyed your reports from China. Definitely first hand and first rate! Have a safe trip home and I look forward to hearing more about your trip! Wayne V

at 11/7/2005 2:09:45 PM, Jim from Rhinebeck said:

I’ve read bits and pieces of your blog; have enjoyed, and agree with, your perspectives. I’ve been to Shanghai on and off, for 10 years, to attend Semicon China trade shows. It’s amzing to see Shanghai’s transformation in that time, when the Pearl tower was the only really tall structure in the city scape. Now, Shanghai boasts a skyscraper a day and a 430 km/hr ride on the mag-lev.

Jeff, if only you could have seen the bicycle traffic in 1995! So much of that traffic has moved to the subway. This past March was my first endeaver to see other cities in China; Beijing, Xian, Shanghai, and Hong Kong. Seemingly endless examples of cultural, social, and political juxtaposition. My Beijing business associate (friend/guide/translator) survived the Cultural Revolution, and is now quite proud to own his own home and car.

China, for all its complexities and contradictions, is modernizing at an unfathomable rate. It’s a 21st century version of the California gold-rush. Enough of the profound. Time and Newsweek covered the profundities in detail. Simply put, China is a great place to visit. An when you’re done, you’ll be wishing Chinese foot massage parlors in the US.

at 11/7/2005 2:13:04 PM, Phil Harris said:

Having recently returned from a 2 week stay in Beijing, I found the people friendly, warm, and very helpful. My coworkers were enthusiastic and recognized that I brought information on well established western procedures. It was also an opportunity for me to learn that business in China has some similarities and differences. I hope to make this trip again shortly and look forward to it except for the plane ride. That leaves a lot to be desired. Thanks for your perspective. Phil

at 11/7/2005 2:14:43 PM, C.C.Poon said:

All the tour articles make very interesting reading. Worth many times over the money spent (by whoever)on the trip. I look forward to reading the other articles yet to come. Many thanks for writing them, Jeff.

at 11/11/2005 8:49:12 AM, Pete Flynn said:

Jeff, I want to let you know that this series has been great. I’ve enjoyed every post and even most of the comments by other readers. Even the dopey ones.Since I work for a company that sells lots of “stuff” to the Chinese electronics industry, their success means I keep working. I see the global integration of China ultimately resulting in more freedom for the Chinese people and a reduction in tensions. I will look forward to more of your articles.

ARMing China

Travelling the Silicon RoadSHENZHEN, China — Software is a hard sell in China — in a country that understands the physical aspects of manufacturing inside and out, the concepts surrounding software are perhaps somewhat esoteric.

Furthermore, while system integration is something the Chinese technology industry is adept at, design is still relatively weak by comparison. This may make China an unlikely place to launch an embedded software and hardware company centered on microcontroller development kits, but on the other hand, that would make you the only local game in town, and being local is often a key element to doing business in China.

This is exactly what one company, Shenzhen Embest Info & Tech Co. Ltd., has done.

Embest, a privately held company started up six years ago, is the first and probably still the only domestic company to offer commercially available development tools for ARM processors. ARM is a very popular technology, and the Embest founders were already familiar with it, having worked in the industry, so it was a natural fit.

The company is focused on enterprise customers, the R&D market and education — it sells kits specifically designed for universities and engineering education.

“Things are getting a little better,” said Zhang Guo Rui, international manager for Embest, referring to the Chinese market for its products. Once domestic companies understand the concept of embedded software and what can be done with it, it’s an easy sell, he added.

And with China recognizing the need to develop its own intellectual property in order to keep the revenue generated here inside the country, the domestic market is growing. While software design was often outsourced to India in the past, this is beginning to change as more domestic companies and international companies involved in the domestic market are focusing on their design efforts in China, Zhang said.

The company is located in Shenzhen, where much of the Chinese market for its embedded software and hardware developed is located, given the huge manufacturing base in electronics here.

Still, it’s not a huge market to begin with, and a nascent one in China, so Embest has directed the marketing for its patented technology on international markets. It began selling overseas in 2003; today it is doing business in several countries, including the United States, France, Germany and South Korea.

The company has already built a reputation as a third-party supplier of ARM development products; the industry’s penchant for outsourcing to China to lower costs coupled with Embest’s position in the local Chinese market and its capability to design finished products based on ARM processors, has all helped to boost the company’s market presence both domestically and abroad, said Zhang.

Electronic News Travels to China

Eventually the company would like to expand beyond ARM and produce development kits and product designs around other technologies, such as DSPs. It’s been talking to a Western DSP chipmaker about doing just that, although the talks are only in the initial stages. Like it does for ARM, it wants to introduce tools into the Chinese market to develop designs based around the DSP.

Of course, this could provide the Chinese proverbial win-win situation: It would boost the foreign company’s presence in China via a local supplier, and help spread Embest’s presence in the international market.

Editor’s Note: As explained at length elsewhere on this site, this is a news story written by me that originally appeared on the now-defunct Electronic News’ website, which is long gone. It’s former sister pub Electronic Design News (EDN) currently holds the copyright to all Electronic News copy (to the best of my knowledge). You can still see a copy of this story at EDN.

Chinese Electronics: Getting Ahead of the Game

Travelling the Silicon RoadSHENZHEN, China — It seems wherever you go in China’s cities, north south, east or west, business and government are looking for foreign partners and investments.

Start-ups, local and central government, well-established domestic companies alike, all discuss the possibilities of establishing a win-win relationship with companies from the West, particularly the United States. These efforts are still relatively nascent in China’s chip industry, with a few notable exceptions like foundry Semiconductor Manufacturing International Corp.

And on the other side, many are just as eager. In some cases, they’ve already been here for years, like Agilent or Applied Materials. Or they are just now looking to get involved in the booming Chinese market, and might not be sure who to partner with – venture capital firms, for example, look at the raft of Chinese chip and technology start-ups, and are bewildered about which ones to choose.

But China’s electronics manufacturing industry is considerably more developed than its chip industry. While developing intellectual property and bringing it to market might not be a Chinese strongpoint, manufacturing is, so it is only natural that China’s electronics manufacturing industry is humming along strongly and has been for years.

While the semiconductor content of Chinese electronic components may come from beyond China, the rest of the content that goes into making an electronic product can be found locally here in China, be it cables, boards, connectors or whatever. In many cases a product can be sourced entirely here in Shenzhen and that, along with cheap human resources, is why manufacturing is inexpensive here compared to the rest of the developed world.

Look at the cost of manufacturing a television. Thirty years ago, it cost about 3,000 yuan; today it costs about 500 yuan to produce a TV in China, noted Chao Getu, a general manager at Shenzhen Deren Electronic Co. Ltd. That’s about 62 bucks.

“The same thing will happen in the field of white goods and household electronic appliances, sooner or later,” Chao observed. “The advantage of China lies in the whole [electronics] supply chain.

And when it comes to doing business with the West, China’s electronics companies are also ahead of the game. Deren Electronic is a good example.

A privately held company created in 1992, Deren is focused on R&D and production of electronic connectors. It has a solid foot in the middle layer of the electronics supply chain in Asia and the world; its revenue this year should be around $87.5 million (700 million yuan). It has seven factories around China, and has an impressive list of domestic and foreign customers.

Among its Chinese customers are giants like home appliance manufacturer Haier and television maker Konka. Among its foreign customers most notably are big Japanese names in electronics: Toshiba, Sony and Sanyo – a notably tough market to crack, even now.

How the company got into Toshiba and the Japanese market initially, was its competitive price, said Chao. While the Western supply chain is open to foreign suppliers, the Japanese electronics supply chain is still relatively closed, at least until a few years ago.

To get more solid footing in that market, Deren went a step further, hiring Japanese engineers and setting up a new business division specifically to interface with Toshiba and Japanese customers, one that operated like a Japanese business; Deren recruited staff for that division from Japanese companies.

“This was a good start for Deren,” said Chao; it led to its business with Sony and Sanyo.

Deren has also been able to lure the business of U.S. giant Tyco Electronics. The two companies announced their partnership in January of this year, signing a strategic agreement for connectors to be used in home electronic appliances and communications equipment. Deren agreed to manufacture and distribute certain Tyco brands within China; in addition to this OEM agreement it also serves as a distributor for other Tyco products.

For Tyco, which was at one time naturally a competitor of Deren, it gained a local foothold in the blossoming Chinese market, a place it had struggled to penetrate previously. By partnering with Deren and offering its technology, it suddenly was inside China’s large home appliance market.

Meanwhile, Tyco is supplying Deren with patented electronic connector technology, advanced management techniques and brand marketing, and more importantly an entry into the top-level of its target customer base.

Essentially, the deal represented the localization of Tyco – an important step for foreign companies doing business here – and a step toward the globalization of Deren Electronic. Tyco brought in staff from Taiwan to train Deren employees, gaining access to people with business experience overseas.

As Chao observed, “We need more cultivation than utilization.”

Electronic News Travels to ChinaThe company has already learned a lot from Tyco in less than a year, he said. Its human resources management and factory production and product design have all seen great improvements. While the cooperation on a sales and marketing level remains somewhat lower by comparison, Deren hopes to raise that level going forward.

It’s not resting on its laurels either; it is currently courting a large European company as well, hoping to duplicate its relationship with Tyco and continue its foray into global markets.

Editor’s Note: As explained at length elsewhere on this site, this is a news story written by me that originally appeared on the now-defunct Electronic News’ website, which is long gone. It’s former sister pub Electronic Design News (EDN) currently holds the copyright to all Electronic News copy (to the best of my knowledge). You can still see a copy of this story at EDN.

Let Us Set the Record Straight

Travelling the Silicon RoadSHENZHEN, China — I was just going through the comments section of this blog to make sure all of the submitted comments had been cleared, when I came across one in an earlier post that was still pending. You see, in order to keep out spam and profanity, we review all the comments that are submitted prior to them appearing live on the site.

And it was the straw that broke my metaphorical camel’s back.

You can find it here. But it doesn’t really matter; there have been similar ridiculous comments. Being a journalist, I’m pretty thick skinned; we’re like lawyers: everybody loves to hate us, and you either get used to it or go into PR. But everyone has their limits.

So, let’s get one thing straight, and I’ll spell it out nice and simple even for the narrow-minded and thick-skulled (which fortunately seem to be in the minority). I am not an apologist for China’s communist government. Yes, I was very surprised at the openness and passion of the officials that I’ve met, both locally and nationally. They were not the automatons I expected.

But NOWHERE have I said, despite several self righteous reader comments to the contrary, that I think China’s political system is a good thing, or its repression acceptable.

I’m a journalist, and freedom of speech and the press is my birthright as an American, after all. I’d take up arms to defend that right. I do not say these words lightly; in these days of the Patriot Act, I sometimes wonder if it will come to that. But the Chinese don’t have freedom of the press here; there are journalists in prison in China, jailed for what they have written. Of course I think this abhorrent.

Got it? One more time, follow along: Jeff say repression bad; free speech good.

The thing that people in the West need to understand is that your average Chinese citizens, while not enjoying all the freedoms we have in the West, don’t appear to be, nor to they think of themselves as, repressed by a totalitarian system.

I know it’s a blow to you ideologues out there, but I’m afraid it’s true. But again, for the narrow-minded, indignantly self-righteous, let me spell it out in tiny little words that even you can understand: I’m not personally justifying the Chinese political system. Just telling you what I’ve observed and experienced — whoops, sorry, let’s say “seen and heard” — this past month. Don’t shoot the messenger.

If you don’t believe me, come here and see for yourself and talk to them, like I have.

It’s a difference in culture between East and West. Like I’ve explained here before, the Chinese people are perfectly capable of revering Mao Zedong as a hero while acknowledging that the Cultural Revolution was a horrendous mistake. And while people like me, being an American, can’t completely understand how Chinese people can be so patient and complacent about things like freedom of speech, nevertheless, they are.

I’ve had a lot of conversations with Chinese people about this issue, and my interpreter, Zhike, a 24-year-old Chinese graduate student, put it best: “We have freedom of speech in China, just not in the media.” He said it with a knowing smile. This is such a thoroughly Chinese way of looking at the world; it was a very Chinese thing to say.

To understand why, ultimately, I think you have to come here and know China for yourself. But I’ll add this: the specter of the Cultural Revolution does still lingers here, as does what happened in Russia following the collapse of the Soviet Union. The Chinese are an ancient people, and are nothing if not patient; they are happy with the changes that have been made over the past two decades, but they are concerned about what might happen if things move to fast — after all, look at the last revolution they endured.

I do not agree with what you have to say, but I’ll defend to the death your right to say it.”
— Voltaire

Now, second of all, it is time for some self-righteousness indignation of my own; this is a subject I’m unapologetically passionate about. Read it and weep.

This business of anonymous ideologues posting morally indignant comments about me or what I supposedly said, and then not having the courage to put their names to it, is quite frankly pathetic. There is no excuse, and you should be ashamed.

You see, people have died protecting this right that we in the West enjoy, the right to express our political beliefs, whatever they may be, in a public forum like this. You do those people a disservice — if not an outright insult — by hiding behind anonymity. You insult their bravery with your cowardice. As far as I’m concerned you might as well run though Arlington cemetery kicking over gravestones.

It’s rather sadly ironic in these times of right-wing, red-white-and-blue dogma in the United States.

So say whatever you wish; ultimately I don’t care, nor do I care who you are. But you should nevertheless have the decency and courage to put your name to what you say.

This isn’t the kind of forum that you have to worry about your spouse or boss finding out you frequent, after all. And this is a U.S.-based site; there are no government goons monitoring it. Not yet, anyway.

Trust me, it’s not hard, I do it every day. I still do it, even though I’ve had my life threatened because of what I’ve written more than once. I’ve been threatened with lawsuits a number of times. I’ve even had a brick through my window and my car vandalized.

And yet I still put my name to what I write, not because I’m brave or thick skinned, or that I think my writing is particularly brilliant, but because it is my right. And it’s yours too.

The only excuse you might have to utilize anonymity here is if you are perhaps a Chinese political dissident, still on the mainland, but I’m reasonably sure “Dave in Dallas” or whoever is not a political dissident.

Electronic News Travels to ChinaLet me just add that I realize that many will take this as just my own inane blah blah blah, and those few at whom this was directed will surely have missed the point. The only thing I’ll say in my defense is that my real name is proudly displayed with it, blather or not.

Neener neener :p

Jeff Chappell

Editor’s Note: As explained at length elsewhere on this site, this is a blog entry of mine that originally appeared on the now-defunct Electronic News’ website, which is long gone. While its former sister pub Electronic Design News (EDN) currently holds the copyright to all Electronic News copy (to the best of my knowledge), as far as I know, this blog content isn’t hosted anywhere else on the Internet, hence my reproduction here.

Original Comments

at 11/4/2005 12:16:34 PM, William Woodley said:

Good for you! I have the same beliefs after visiting China.

at 11/4/2005 12:41:45 PM, Mike Jones said:

There are a lot of people in the USA still operating with an ethnocentric mentality. This is a way of thinking that can’t imagine anyone else in the world having a valid idea or way of life different than ours. And our success has only fostered this kind of thinking because it is very easy to translate success into righteousness.

What is coming next is a worldcentric mentality. This viewpoint will be a result of globalization and its challenges. In general many Europeans and Asians are ahead of the game in this regard. The rightwing in the USA just does not like the fact that they are not the center of the universe.

It is much like what the Catholic Church had to go through when it was demonstrated that the earth was not the center of the universe. And the pain the USA will suffer may be no less. All right wingers take note: we live on planet Earth and the USA is not the Garden of Eden and you are not God’s chosen people. We are all related right down to our genetic material. Mike Jones mike@integralate.com

at 11/4/2005 12:45:47 PM, David Naegele said:

Jeff, First let me say that I have enjoyed everything that you have shared. I doubt I will ever have the chance, or time/money, to go that far away.

With that said, I must also say this about the anonymous postings. In the local news paper all letters to the editor must be signed. In this day of political correctness, many topics are off limits to anyone who wants to keep their job. Some things could easily be misconstrued by ideolouges and cost you a fortune defending yourself against what turns out to be perfectly legal actions. Innocent verdicts don’t restore your bank account.

Take a look into the actions of the BATF in recent years for some overly blatant abuses. There are many agendas being pushed, for good and not so good. I don’t want to get caught on the wrong side of somebody’s agenda. For this reason, letters to the editor once had a “name witheld by request”, but that is no longer the case. Yes, we too have freedom of speech in the U.S., but I don’t believe we have it in the media here either.

at 11/4/2005 12:49:47 PM, cmichaud@mcintoshlabs.com said:

RIGHT ON.WRITE ON !!!!

at 11/4/2005 1:05:29 PM, BobboMax (aka bfank@aol.com) said:

I also enjoyed those paragraphs that ended w/ neener, neener. My sentiments exactly. Things have gotten to the point that the atitudes expressed in the “Patriot Act” require honest patriots to step in front of the tanks in the Capitol Ma– um, ahh, I mean Tienanmen Square.

Some of us are going to get squashed, just like the men and women in Iraq, both Iraqis and Americans. It’s still true that blood is the price of freedom and it must bought again every generation. Buying oil with blood is another matter.

at 11/4/2005 1:05:37 PM, Joseph Kagan said:

Jeff I enjoyed reading all your articles. They made reading Electrinic News alot more interesting. I agree with your article “Let us set the record straight”. I was in China in May making a study of the dairy industry. My impresions of China were similar to yours. I wish you continued success in your work. Joe K.

at 11/4/2005 1:27:49 PM, P. C. Chen said:

Right On, Jeff! One learns sooner or later in life that whatever one does, there will always be people putting a negative twist to it for their own hangups. A lot of people these days seem very hung up on their own perception of the world, regardless of reality. My philosophy is that, as long as I do things to the best of my ability and with a clear conscience, I don’t really give a hoot to what some narrow-minded people might think or say.

Glad to see you think likewise. I enjoyed your columns very much. My admirations for staying cheerful and objective when in a very different cultural environment.

at 11/4/2005 1:29:42 PM, Herb Smith said:

I decry the religious repression in China, and also the government censorship and monitoring of various media. And yet…one of the best ways to change a repressive system is to expose it to capitalism, however imperfect THAT is. The Chinese government attempt to crush Christianity will also fail. The Church thrives on reporession. So China is going to change, and in ways the government will not be able to control.

at 11/4/2005 1:40:30 PM, Bob Duncan (in Dallas) said:

Jeff, thanks for sounding off against those gutless critics. I enjoy your insight into China and want to learn more about the country than just who’s in power today. Your blog has been terrific! Too bad you have to come back! I also share your concerns about the way our government is treating our personal liberties. Waving the flag and threatening us with terrorist attacks has helped the Bush crowd hide their rape of the American people, both our tax dollars and our privacy.

at 11/4/2005 6:40:10 PM, Al Giese said:

Hello Jeff, I have been enjoying reading your reports from China. I traveled to China in the very early years when the doors to China first opened (first trip in 1977) and sold Thermco Diffusion Furnaces through MEI in Beijing to the then small Semicionductor factory in Wuxi. In those days we traveled on simple and slow local trains and the best hotel in Beijing at that time was the Friendship Hotel. Only old timers will remember this hotel.

Needless to say there were no fancy restaurants, high speed trains and the best you could hope for as local transportation was an old Russian build Limosine with a poorly working heater in the deep of winter. The reason I’m sending this note is to express my full support for the position you have taken in the above article.

There are always some jokers that try to mess up business with narrow minded and arrogant political views. After these early business visits to China which were very successful, I didn’t believe that China would ever manage to build a Semiconductor business or any other high tech business. But I have to give them credit, with support from Beijing and from local Government agencies, it is an unbelieveable success story and as you have said, one has to visit the country to believe it.

The positive changes in business and the changes for the majority of the Chinese population are real and amazing, especially for one who has been there and observed the country 25 years ago. Jeff, please keep on writing. You are doing a great job and don’t let ignorant, narrow minded readers disturb you. Best regards Alfred W. Giese IBC,International Business Consultant

at 11/5/2005 1:45:09 AM, Jeff Chappell said: Wow. Rather just the opposite of the reaction I had expected. A gracious thank you to one and all.

at 11/5/2005 12:33:37 PM, Tom Murphy said:

Interesting observation about PR. I was a journalist for more than 10 years before I was laid off for the fourth time and then took a job in public relations. There were times in journalism were I was villified by readers for something I wrote. But I did not feel the true wrath of criticism until I was involved in client-vendor relations as a PR practitioner.

Even ten years of having rocks thrown at me as a journalist barely gave me thick enough skin to deal with the pressure here. People get fired based on the whims of an executive. That’s pressure. Journalists are protected by the first amendment and sometimes by a publication with a backbone. PR practicioners don’t have that and when you’re dealing with a publicly traded company and the entity’s shareholder value is on the line there is just a great deal at stake. That’s something I was never exposed to as a journalist but it is an experience that is highly valuable.

at 11/6/2005 2:25:13 PM, Clayton Werner said:

Onya Jeff! Too many of us from across the oceans see only the bad side of this North amero-centric push. The world is full of real people, different languages, cultures and the like, viva diversite’ (from the land of Oz) Clayton

at 11/6/2005 6:54:45 PM, Mei said:

Hello, I am Chinese, and love to read Jeff’s writings. What Jeff wrote here is quite to the point.

Kingtype: Sussing Out the Chinese CATV Equipment Market

Travelling the Silicon RoadCHENGDU, China — While in China this past month, Electronic News Editor Jeff Chappell sat down with the founder and current board chairman of Chengdu Kingtype (Electronic) Group Co. Long Yon Gaing to talk about China, its burgeoning electronics industry, standards, and, specifically, the market for cable, digital and satellite television electronics.

Kingtype, the biggest manufacturer of CATV equipment in China, is one of the first domestic, privately held companies to form under China’s economic reforms of the early 1990s. In addition to the Chinese market, it also exports equipment to other parts of Asia, as well as to the United Kingdom.

What follows are excerpts of the conversation.

Electronic News: Can you tell us a little bit more about the history of the company and how it came about?

Long: Under the leadership of Deng Xiaoping, the central government in the late 1980s and early 1990s embarked on the policy of opening up China and its markets. It was at this time that several engineers including myself organized the company. There were six of us that started Kingtype in 1992. After 13 years, we’ve seen steady growth and great progress. The government’s policies have helped us achieve stable growth. Our current net assets are worth 260 million yuan [$32 million].

After so many years of development, we now stress technological innovation. We’ve had to address many problems of the years, but we’ve developed high quality products. We are the best among CATV equipment suppliers in China; we’re the No. 1 brand. Our company has also been directly involved in developing CATV standards in China. Others and I in the company were invited to serve on the National Broadcast and TV Standards Committee.

Electronic News: As a supplier of digital and analog CATV broadcast equipment and set-top boxes, do you do all of your own system design in-house? And are the components of your system produced domestically or abroad?

Long: Yes, we provide system design and system integration. Much of the materials and components, as related to semiconductor content in our products, come from outside China, while the rest of the system components come from domestic companies.

Furthermore, our industry is very professional, or business-to-business; it’s not like the consumer electronics industry. The domestic capability of China to design and produce its own chips is still relatively weak, so we must get our chip components from outside China, and will continue to do so for the time being. In the future, however, particularly for our set-top boxes, which just went into production, and satellite receivers, which we’ve just begun to start manufacturing, we perhaps might begin to use domestically-designed components.

Nowadays, the Chinese government is heavily supporting domestic chip design, manufacturing and the related software technologies. It is developing very fast. But today, our main products are CATV infrastructure equipment, such as network transceiver equipment, optical transmission equipment and wireless emission products, and system management software. And also digital signal broadcast equipment. We do make set-top boxes and satellite receivers, as well, but the set-top box isn’t that popular in China; digital television is still a small market.

As we’ve learned from the U.S. market, it’s not an easy one. This market is tough, and we also face outside competition. You see, unlike the United States, CATV in China is a public broadcast and service medium. So it is difficult to sell related products to the consumer. We would like to see China follow the U.S. FCC, which has set a new policy requiring that digital tuners be integrated with television sets in the future within the United States. As the set-top box isn’t popular here, we think we should follow this example in China.

Electronic News: With the growth of China’s economy, could that possibly spurn the growth of the market for consumer-related CATV and digital equipment, such as set-top boxes?

Long: Of course we will see considerable development in the future, and this will help promote the whole industry. Next summer China’s first direct satellite television broadcasts will begin, for example. That is when we plant to start selling our new satellite receivers. And the future integration of a digital tuner with the TV, this will promote sales of digital television. Once common people have the means to receive digital broadcast signals, it will spawn more digital programming – at that point we’re looking at a bright future.

Electronic News: Can you tell us about the state of broadcast and TV standardization in China?

Long: How fast the industry develops depends on China’s standards development. There are a lot of old standards: DVB, MPEG-2, and so forth. And now there are new global standards emerging, such as H.264. Here in China, we want to develop our own standard: AVS . Of course, the semiconductor industry is also concerned about this problem. These varying standards affect their design and manufacturing, and their design and manufacturing in turn affect ours.

Electronic News: So China’s own domestic standards will help China’s internal IC industry then?

Long: It should promote domestic IC design. It is why we set up our own standards. The H.264 standard, it costs too much money for domestic chip companies to design and produce related components. The MPEG-4 [a standard technically identical to H.264] actually is a good standard. …

Personally, I prefer the H.264 standard. But as a member of the committee, we can’t support it. But it does have a lot of support from the chip industry at large, however. If we did support it, we might see our own market [for related end-user equipment] develop more quickly. The number of chipmakers designing for the emerging AVS applications is still quite small. But this isn’t only my opinion. A lot of other committee members feel the same way. If the H.264 standard can eventually offer us a reasonable cost, we will accept it. That’s why China is waiting for the standards to mature a bit. We’ll wait and see. And that’s why we haven’t put our set-top boxes into mass production, because of the standards issue. DVB was the standard, now we are waiting for the new standard.

Electronic News: Can you tell us why Kingtype chose to set up shop here in Chengdu?

Long: Sichuan [Chengdu is the capital of Sichuan Province] is a base for the electronics industry in China. It stems from the era of Mao Zedong. In the interest of national security, the central government at that time adopted a policy of moving key industries inland.

Nowadays, the environment and talent here is quite rich. There are several excellent universities here, and a lot of electronics companies in China originated here; a lot of other companies in other cities – Shanghai, Shenzhen, etc. – their founders came from here.

The maturation of government policy has helped Chengdu grow, as well, but perhaps it has helped other cities such as Shenzhen even more so. But it will all lead to a more prosperous Chengdu. This city has demonstrated a lot of advantages under the new policies, such as the engineering talent available. There are a lot of multi-national corporations here now, too. And the living environment – the cuisine, the lifestyle – that’s why we chose Chengdu as our base.

Electronic News: Is there anything you would like to add, or anything else we should cover?

Long: Right now Kingtype is the main provider of CATV equipment in China. The next step for us is to cooperate with an overseas partner. We can learn advanced technology and management techniques from them; they can gain valuable access to the Chinese market. We are interested in mutual market development and R&D. It can be a win-win.

We also want to begin exporting more of our products beyond China. In fact, several companies outside of China have contacted us about OEM partnerships, inquiring about production of equipment for export.

Electronic News Travels to ChinaI’d also like to mention our involvement in two-way HFC [hybrid fiber coaxial] network equipment. [In 2004, the State Administration of Radio, Film and Television set up an HFC network technical lab within Kingtype. The company handles technical training for HFC operators in China.] Our company also wants to share its leading edge two-way HFC technology with the world. We’ve attracted a lot of attention already from Americans in this industry that came to see our two-way HFC technology; it’s won a lot of praise. We can build the related infrastructure for two-way HFC networks; our labor costs are low – it’s an advantage for us. But I want to stress the importance of the advantage of this type of network. Just in the last several months, we’ve done projects in this market, and it’s been well-received by consumers.

Editor’s Note: As explained at length elsewhere on this site, this is a news story written by me that originally appeared on the now-defunct Electronic News’ website, which is long gone. It’s former sister pub Electronic Design News (EDN) currently holds the copyright to all Electronic News copy (to the best of my knowledge). You can still see a copy of this story at EDN.