The growing portable consumer electronics and personal computing sectors have been driving chip component production in the Greater China region. In mainland China, production in 2005 reached about 415.15 billion units of chip capacitors, inductors, resistors and antennas, according to estimates by the China Electronic Components Association (CECA). Output is forecast to further increase to 498 billion units in 2006. The surveyed mainland China companies in this report are expected to account for about 47 percent of the country's total output in 2006.
Excluding chip inductors, Taiwan produced 266.5 billion units of chip components in 2005, with sales totaling US$636 million, according to the Industry and Technology Intelligence Services (ITIS). Production is expected to rise to 292.6 billion units in 2006.
This report focuses on the chip components industries in the Greater China region, and how the surveyed makers keep up with the rapidly growing demand and intense competition, particularly in pricing.
Key Highlights of This Report Include:
• There are more than 200 chip components manufacturers in mainland China.
• Of the 500 passive components makers in Taiwan, more than 100 are chip components makers.
• Total output of the surveyed mainland China makers reached 185.1 billion units in 2005 — accounting for 44.5 percent of the country's overall output in 2005.
• In 2005, the combined output of mainland China and Taiwan companies included in this report totaled 214.5 billion units — accounting for 31.5 of the two region's overall production.
• The majority of the chip components makers in mainland China are chip inductor companies, most of which are midrange to small-scale suppliers.
• Mainstream sizes of chip components in mainland China and Taiwan are 1005 (0402) and 1608 (0603). However, most makers are now focusing their R&D on 0603 (0201) footprints. One interviewed maker is developing chip MLCCs in 0402 (01005) footprint.
On Chip Capacitors:
• Mainland China's chip capacitors comprise over 70 percent of the total capacitor segment.
On Chip Resistors:
• The chip resistor segment of mainland China accounts for 80 percent of its overall resistor production.
• CECA says mainland China's chip resistor production capacity reached 431 billion units in 2005 — representing about 39.2 percent of the global capacity.
• The combined capacity of mainland China chip resistor makers in this report is expected to reach 5.42 billion in 2006, while that of the surveyed Taiwan makers, up to 23.84 billion units.
On Chip Inductors:
• Mainland China's chip inductors make up over 30 percent of the region's entire inductor sector.
• About 5 percent to 10 percent of the global chip inductor is supplied by mainland China, according to the China Center for Information Industry Development.
• The ITIS says Taiwan's production value of chip inductors account for 3 percent of the world total.
Industry Overview
Mainland China produced about 415.15 billion units of chip components in 2005, according to estimates by the China Electronic Components Association. Based on a projection of an annual growth rate of about 20 percent, output will further increase to 498 billion units in 2006 and to 595.6 billion units in 2007. There are more than 200 chip components manufacturers in mainland China. The major production bases are Guangdong in the south and in the east, Jiangsu province and the municipality of Shanghai. Twenty-four percent of the makers in this report have factories in Jiangsu; 22 percent, in Guangdong; and 18 percent, in Taiwan. The remaining 36 percent have facilities in such provinces as Shaanxi, Shandong and Sichuan; in Shanghai City; and in key areas in Malaysia and Indonesia.
In Taiwan, of the 500 passive components companies that make up the segment, 100 are makers of chip components. Excluding chip inductors, Taiwan produced 266.5 billion units of chip components in 2005, with sales totaling US$636 million, according to the Industry and Technology Intelligence Services. Production will rise to 292.6 billion units in 2006, with sales reaching US$698.3 million.
Market Situation
Applications of chip components have been expanding for the past years, particularly for consumer electronics, such as VCD and DVD players, MP3 and MP4 players, mobile phones, LCD TVs and gaming devices. According to research firm Gartner Inc., worldwide production of mobile phones will reach 900 million in 2006 and will top 1 billion units in 2008.
As more functions and features are incorporated in mobile phones, more chip components will also be required. The 3G mobile phone alone requires 300 to 600 units of chip components.
Another huge potential market for Greater China chip component makers is the automotive market. However, these makers are yet to make any significant in road into this market due to technology limitations.
Integration is foreseen to erode the market share of chip components, but not in the near future. Chip resistors, chip capacitors and chip inductors will be integrated into a single chip toreduce size while increasing efficiency. However, integration entails a more advanced technology and higher production costs.
In 2006, the market price of chip components is expected to inch down. In the chip resistor line, Taiwan-based companies lowered their prices, forcing mainland China makers to also reduce quotes.
While manufacturers are positive of market growth, prices are declining. Quotes of 0603 (0201) and 1005 (0402) chip components, particularly, are expected to decrease steadily by 5 percent to10 percent every year.
Production Direction
Although the production trend is rapidly moving toward chip components in 0603 (0201) footprint, production in mainland China is mainly in 1608 (0603) and 1005 (0402)case sizes. Electronic manufacturers in the country prefer using the1608 (0603) and 1005 (0402) chip components due to the products' cost effectiveness.
Supplier Profile
ABC Electronics (Shanghai) Corp.
Formed in 2003, ABC Electronics(Shanghai) Corp. is a subsidiary of Taiwan-based ABC Electronics Group, a large-scale global chip inductor manufacturer. The company is mainly engaged in the production of wound chip inductors and surface-mount power inductors with applications in communications, PCs and peripherals,and consumer electronics.
Ranking among the top five wound chip inductor manufacturers worldwide, ABC Electronics Group has three factories in mainland China — two in Guangzhou and one in Shanghai. The two factories in Guangzhou have investment of US$1.86 million and US$5 million. The Shanghai factory has a total investment of US$2 million and covers an area of 18,648 sqm. ABC Electronic Group's total workforce is 1,362.
The group's customers include Motorola, Siemens, Garmin, VeriFone, Inventec, BenQ, Askey, NEC and Alteck. Currently, ODMs accounts for 30 percent of its business and the remaining share is for own brand sales.
Overseas markets absorb 60 percent of the ABC group's output, with Japan accounting for 42 percent share; Europe, 39 percent; the US, 6 percent; and the rest of Asia, 13 percent. The group has a branch and sales offices in the US as well as sales offices in Germany, Italy, Australia, New Zealand, South Korea, Israel, Sweden and France. Prices are expected to drop by 5 percent to 10 percent annually.
Manufacturing Capability
Utilizing 90 percent of its capacity, the group has a combined capacity of 14 million units of wound chip inductors, 12 million units of surface-mount power inductors, 1 million units of surface-mount transformers and 4 million units of surface-mount filters every month.
ABC's factory in Qixian, Fengxian, is more than an hour's drive from the city center. The two-story building has about 200 workers. Except for the plating process being outsourced, all other manufacturing processesare done in-house. Most of ABC's production equipment are also designed and manufactured in-house.
The Global Sources team toured ABC's factory. The first floor is used for the manufacture of wound chip inductors while the second floor is for the production of surface-mount power inductors. The team first visited the second floor. The whole production process includes wire winding, welding, wire arranging, cleaning, epoxy potting, baking, printing, visual inspection, electric inspection and packing. The workshop has 30 sets of semi-automated wire winding machines, two sets of welding machines, an ultrasonic cleaning machine, three baking machines and four packing machines. Some of the processes, such as wire winding and epoxy potting, are settled into "leadfree" or "leaded" areas.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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