Xiamen: A Bright Light in China’s Tech Industry

Travelling the Silicon RoadXIAMEN, China – If you’ve bought a set-top box recently or perhaps a new appliance – or if you’ve used a remote control in the past decade – there’s a reasonable chance you were utilizing one or components that came from Xiamen Hualian Electronics Co. Ltd.

Or if you’re a Wall Street analyst or venture capital firm trying to finger the few start-ups among the multitudes in China that will be successful, or if you compete in the optoelectronics device market, you’ve probably at least heard of a few of the companies, old and new, here in this sub-tropical southern coastal city. While Chengdu in the east may have its backend manufacturing, Shanghai the front-end fabs, and Beijing may play host to much of the R&D taking place in China right now, Xiamen is a Chinese center for optical technology.

It’s not the only city in China to place an emphasis on optical device manufacturing, and other cities have their share of domestic opto players. But Xiamen embraces the technology wholeheartedly here, as has the central government. In fact Xiamen, located in the Fujian province, has even adopted the moniker of “Light Valley.”

Actively seeking high-growth industries, Xiamen has actively recruited companies like Hualian, said Fan Yu Bo, the company’s president and CEO. The city provides a lot of support, in the form of yuan and specific policies for companies in the optoelectronics industry, among others.

“At the same time, Xiamen is a nice place for hiring … so a lot of high-tech companies would like to reside here,” Fan said. In addition to a nice climate, the city has two other key ingredients, according to Fan: infrastructure and human resources.

Thanks to local and central government support, optical chip technology is one area of high-tech that China actually has a head start on, relative to the rest of its domestic semiconductor industry – although its development is still behind that of other parts of the world. It began developing its optoelectronic manufacturing capability two decades ago, and is already one of the world’s largest producers of light-emitting devices.

Now it is trying to head the rest of the world off at the pass, so to speak, much like Taiwan did with its semiconductor foundries, becoming a center for global silicon chip manufacturing in the previous decade. On the one hand, China’s dedication to its optoelectronics industry is thus economic; on the other hand it is driven by environmental and social necessity: the country is a power-hungry place.

In 2003 the total amount of China’s electricity generation capacity was about 1.91 trillion kilowatt hours, about 12 percent short of actual demand, according to figures from China’s National Solid-State Lighting Engineering Program Office. It estimates the shortfall currently between domestic production and demand from its 1.3 billion citizens and various industries to be as high as 28 percent to 43 percent. By 2020, China’s electricity consumption, based on current demands and current economic growth predictions, could range anywhere from 8 trillion kilowatt hours to 9.5 trillion kilowatt hours.

But the government estimates that it could reduce its electricity demands by as much as 30 percent if the bulk of lighting applications in the country switch to solid state light emitting device technology. It also reckons that the switch could measurably reduce its airborne pollution emissions, given that 80 percent of its electricity comes from coal and oil.

It’s these ideas that drove the creation of the Solid-State Lighting Engineering Program in 2003, a coalition of central government ministries, research and development organizations and local governments.

Xiamen Hosts Old and New

Today China has more than 10 optoelectronic chipmakers, and some 200 light-emitting diode (LED) packaging companies.

Xiamen, specifically, is home to one of the veterans of China’s optoelectronics industry, as well as some of the newest players.

It is host to Xiamen San’an Electronics Co. Ltd., for example, created in late 2000. A partially state-owned concern – its Chinese parent company is involved in steel, iron and electricity production; its other investor is a state-owned capital investment firm – Xiamen San’an is now one of the largest manufacturers of LEDs in China, and it has an optoelectronics R&D program established here as well; the R&D center one of the central government’s goals for establishing the company in the first place.

Xiamen is also home to the aforementioned Hualian Electronics, a company first established in 1984. Today it has two main product lines: optoelectronic semiconductor devices, such as infrared modules for remote control systems, opto-couplers, LEDs and sensors; and optoelectronic-based control and remote control devices, such as infrared remote control emitters and receivers for appliances like air conditioners, refrigerators, microwave ovens and TV set-top boxes.

Unlike many players in China’s semiconductor industry, much of Hualian’s revenue comes from exports, around 40 percent, according to CEO Fan. Many of its international customers include brands recognizable to Western consumers: Panasonic, Yamaha, Emerson and Electrolux among them.

But like many high-tech companies in China today that were around before the turn of the last century, Hualian is a mixture of state-owned and private owned as well. Half of it is owned by a state capital company; the rest of Hualian is owned by a parent company that is itself publicly owned and traded.

Fan naturally sees China’s Solid-State Lighting Engineering Program as a good opportunity for Hualian; the company is currently investing some $16 million (150 million yuan) more into R&D on low-power LED devices.

Over the years, a company like Hualian has seen a lot of changes, from the time it was founded when China was just beginning to open up, to today when it is aggressively pursuing economic growth and a conversion to a free-market driven economy. Both central and local governments naturally tend to lend more support to companies that prove successful in the market place, said Fan, and this, along with China’s economic growth, has lead to chances for the company’s growth.

Electronic News Travels to ChinaAbout the time it began exporting products in the 1990s, it began to realize the importance of developing its own intellectual property, as did the Chinese government. In the past, the government didn’t stress the importance of companies like Hualian developing their own IP, but that changed when China began to actively seek international trade, Fan acknowledged.

Today, for companies like Hualian to compete globally, not only does it have to create its own IP going forward, but respect those of the companies it competes with on the global stage, Fan said. That’s why in recent years, the company has put a lot of funding into R&D programs, and begun applying for patents.

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.

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