Mainland China's production of circuit and heat protection components is on a solid growth path, having produced an estimated 71 billion units in 2004. The total output is expected to climb 21 percent year-on-year, to hit 101 billion units in 2006. By 2007, the region is forecast to produce 115 billion units at a slightly reduced growth rate of 13 percent.
Industry insiders place mainland China at the forefront of the supply chain, estimating that at least half of the global output originates from the region. Aggregate sales are predicted to swell from US$2.34 billion in 2004 to US$4.36 billion in 2007.
The global industry itself is growing at about 10 percent annually, driven by home appliances, business automation equipment, automotive devices and industrial machinery applications. Bullish forecasts are encouraging more manufacturers to join the line, growing the segment in mainland China from 1,100 makers in 2004 to an estimated 1,300 by 2007.
This report covers 37 companies: 24 from mainland China, 11 from Taiwan and two from Hong Kong. Observations made and statistics provided in this report are based on input from these respondents.
On Manufacturing Capability
• The industry in mainland China began in 1949 and has been growing by up to 10 percent per annum since 2003.
• In this report's supplier universe, makers of cooling fans, CPU coolers, heatsinks and fuses makeup the majority.
• About 15 percent of the surveyed makers maintain production facilities measuring 10,000 sqm to 50,000 sqm.
• Some companies have production bases in Macau, Taiwan, Hong Kong, Czechoslovakia, Malaysia, Mexico and the US.
• The average utilization rate among most greater China makers is 77 percent.
On Cooling Fans
• In 2004, about 90 percent of the world's supply of cooling fans with diameters of less than 200 mm originated in mainland China.
• The total output reached 160 million units in 2004, and is expected to increase to 200 million units by the end of 2005.
• The mainland China segment sustained an average production growth rate of 15 percent per year for the last three years.
• The continued incursion of Taiwan, Hong Kong and Japan cooling fan makers into mainland China since 2001 is mainly credited for the production boom.
On Heatsinks
• About 50 million units of heatsinks were produced by mainland China makers in 2004, according to the China Electronics Industry Cooperation (CEIC).
• Total revenue was pegged between US$12 million and US$24 million in 2004, and is predicted to continue on a steady or up track in 2006.
• The segment in mainland China is composed of about 100 makers.
• R&D focus is on products with lower noise levels, lesser power consumption, longer operating life and higher airflow.
• Guangdong, Zhejiang, Jiangsu and Shanghai are the production hubs. At least 80 percent of these makers conduct manufacturing in relatively small workshops.
Industry Overview
The global market for circuit and heat protection components was estimated at about US$3.8 billion in 2003, growing at an annual rate of about 10 percent. Meanwhile, in mainland China aggregate sales of these components are forecast to surge by about 80 percent between 2004 and 2007. More than 50 percent of these components are devices that protect against over-current while the rest protect against over-voltage. Categorized as a subset of the worldwide semiconductor market, circuit and heat protection components account for about 8 percent of overall discrete semiconductor sales.
The industry in mainland China is composed mostly of domestically owned companies and Taiwan-owned companies with factories located in mainland China. However, some Hong Kong makers have also relocated their facilities to mainland China, urged mostly by low production costs. The total number of makers is now pegged at 1,200, but a growth rate of 9 percent to 10 percent is expected, with the forecast uptrend in global consumption of circuit and heat protection components in the coming years.
Electronic equipment — particularly home appliances, business automation equipment, automotive devices and industrial machinery — are the biggest demand driver for circuit and heat protection components. Fuses and cooling fans emerge as the key growth sectors for this product line.
Buoyed by the continued migration of Asian manufacturers into mainland China, the fuses, circuit breakers and AC contactors segments are poised for huge growth. According to China Customs statistics, the combined export value of safety and detonating fuses, percussion or detonating caps, and igniters and electric detonators increased by 25 percent from US$2.4 million in August 2004 to US$3 million in July 2005. Most of these products were absorbed by Asia and Africa. Shandong and Beijing emerged as the top production hubs, exporting about US$400,000.
In the past three years, mainland China's cooling fans industry has been clocking in a sustained 15 percent annual growth. It is estimated that the total output of DC and AC cooling fans with diameters of less than 200mm has exceeded 160 million in 2004 — accounting for more than 90 percent of the world supply.
In terms of R&D, the continued trend toward miniaturization urges cooling fan makers to develop smaller and lighter models. Dimensions are now down to 6-by-6mm, and are expected to get smaller with the increased demand for notebook PCs. Product development also focuses on reducing noise and vibration, improving airflow rate and static pressure performance, and extending service life. Ceramics and alternative materials are likewise being explored. According to a recent poll, makers in mainland China expect supply of cooling fans to increase, with 93 percent saying that they plan to expand production capacity —some by as much as 100 percent.
Supplier Profile
Asia Vital Components Co. Ltd
Asia Vital Components Co. Ltd is a Taiwan-based company established in 1992. Positioning itself as a provider of thermal solutions for global customers, Asia Vital manufactures AC fans, CPU coolers, heatsinks, heat pipes, heat plates, notebook PC cooling modules and other electronic components. Its products are absorbed by major companies such as Sony, Epson, Fujitsu, Siemens, Toshiba, NEC, AMD, Intel, Dell, IBM, HP, Microsoft, Gateway, Lenovo, Acer, BenQ, Asus, MSI, LG and Samsung.
In 2004, its monthly production included 6 million heatsinks, 7 million DC fans, 5 million coolers, 170,000 PC notebook thermal modules and 3.8 million heat pipes. With sales revenue reaching US$230 million and forecast to hit 280 million by the end of 2005, Asia Vital claims it represents about 35 percent of the global CPU cooler market in 2004.
Manufacturing Capability
Asia Vital has six manufacturing facilities — four in mainland China and two in Taiwan — and a workforce totaling 8,706. It is currently operating at almost full capacity, producing 2 million heat pipes, 3 million DC fans,6 million heatsinks and 3.5 million CPU coolers monthly. The Global Sources team that visited Asia Vital's factory noted that the company is in the process of moving into a new 120,000 square meter workshop in Shenzhen. By the time the new workshop is operational, production of heatsinks, CPU coolers and heat pipes, among others, is expected to rise, and the number of Shenzhen employees to increase from 2,700 to 4,000.The team noted that plastic injection, SMT, magnetic insertion, impeller assembly, winding and final assembly processes for Asia Vital's DC fans are conducted in-house in an automated production line. It also toured the production line for CPU coolers and other cooler types, noting processes including heatsink assembly, fan assembly, automated wire-rolling, firing and balance tests. The heatsink production line, meanwhile, is divided into several processes including stamping, die-cutting, firing, full and rounded cutting and grinding. At the cooler and thermal module production line, the team saw workers doing front-end checking, assemblies, back-end checking, soldering and infrared reflow operations for soldering. Finally at the heat pipe production line, workers were seen doing shrinking, cleaning, heat treatment, sealing, vacuuming and testing.
Quality Standards
Asia Vital's factories are certified to ISO 9001 and ISO 14001 standards, and adopt the TQS and TCS systems in all manufacturing processes. Incoming materials are checked using MIL-STD-105E standard. In checking the exterior appearance or cosmetic aspects of each product, AQL 0.4 percent is utilized; S-3 AQL 0.25 percent is used when checking product size and function.
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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