China earthquake repercussions: Chengdu High-Tech Industrial Development Zone escapes major damage
16 June 2008
It has been my intention over the last few months to devote a column to sharing information about the growing prominence of Chengdu as an electronics manufacturing area. However, with the news of May’s massive earthquake in Sichuan Province in Southwest China, the direction of my piece has been altered somewhat.
What had been shaping up as a piece about geo-economic and strategic investment patterns in Chengdu has now, sadly, become a story set against a backdrop of human tragedy and a struggle for survival for many in this Province. That said, there have been some positive signs for Sichuan Province, and its capital city Chengdu, in the aftermath of the disaster.
First, the facts. The epicentre of the massive earthquake that devastated Sichuan province, resulting in the deaths of an estimated 70,000 people, was only 55 miles (89 kilometres) from Chengdu, a major electronics hub and the capital of the province. Relief operations and rebuilding efforts are ongoing in the earthquake-torn portions of the province in southwestern China.
While it may be difficult to draw a positive from the situation, it has been reported that, fortunately, technology companies operating in Chengdu have reported no deaths or serious injuries to employees as a result of the earthquake. In many cases, activities were temporarily halted as facilities were checked for structural damage, and most of the damage to buildings was cosmetic only. Many of the high-tech manufacturing facilities were constructed using earthquake protection technology which appears to have worked very well.
A little bit of geo-economic background. A study of the hotspots of economic investment across China will show a bias towards the coastal regions, which contribute the majority of the country’s GDP. That said, the rapid growth of the industry in China and changing economic realities have led to significant restructuring. Over the years, a number of manufacturers have relocated to other South East Asian countries, while others have shifted their focus to China’s vast hinterland. As Chinese industry moves from low-end to higher-end technology products, costs are rising and cost-effective manufacturing options are not as easy to find. With the China government keen to spread the benefits of development to China's poor interior and actively pursue a ‘go west’ development strategy, Chengdu is one area to benefit. While its remoteness was the reason why Chengdu became one of China’s electronics industry bases in the past, it turned out to be a hurdle for foreign investors when China first opened its doors in the late 1970s. However, with the passage of time, Chengdu is becoming a hot spot again.
Chengdu has a population of 10.82 million and a total area of 12.3 thousand km2. As designated by the country’s State Council, Chengdu is a centre of technology, trade and finance, as well as the transportation and communication hub for southwestern China. The city possesses the strongest economy in Midwestern China, and is ranked 9th in China for urban competitiveness. The Chengdu Hi-Tech Industrial Zone ranks fifth among China’s 55 designated zones.
Chengdu has a long history in the electronics industry. During China’s 1st Five Year Plan (1955-1960), China established No.10 Institute, its first communications research institute, in the city, and set up Chengdu Telecom Engineering College, now known as the University of Electronic Science and Technology of China (UESTC), the country’s first college with a focus on electronics. The city has steadily developed an IC production chain and has one of most concentrated IC design bases in China with 50 design companies based there, with many located in the Chengdu High-Tech Industrial Development Zone, one of six ‘The World’s First-class Park Initiatives’ pilot zones sponsored by China’s Ministry of Science and Technology. There are more than 11800 companies registered in the Zone, among which 674 companies are foreign invested enterprises, including 33 Fortune 500 companies. Among the huge number of domestic and foreign technology companies in the Chengdu High-Tech Industrial Development Zone, Intel, IBM, Symantec, Microsoft, Fujitsu, NEC, Motorola, and Nokia all have a presence.
In 2001, chip giant Intel decided to expand its assembling and testing capacity in China, and selected Chengdu over Suzhou, Shenzhen, Xi’an and Shanghai. Intel cited Chengdu’s strategic location, the quality of its educational system and the well-trained workforce in the region as the reasons for choosing Chengdu as one of its major production bases in China. More than 70 percent of Intel’s employees are fresh graduates, recruited in the last two years, with the majority coming from local universities. With the completion of a second factory recently, Intel’s total investment of in Chengdu has reached US$ 525 million, making it one of the biggest projects in Central and Western China. Products not only include flash memory, chipsets but also the most advanced CPU products.
When the earthquake struck, Intel immediately evacuated its more than 2,000 workers from its testing and assembly plant. The company reported no injuries to its employees and that its facility escaped damage.
Motorola reported minor injuries to two of its employees during its evacuation. The cellular phone maker employs around 400 workers in the region.
Microsoft's employees were all safe and accounted for, and while its building received minor structural damage, its offices remained open.
Semiconductor Manufacturing International Corp. (SMIC), Alcatel Shanghai Bell, Nokia Siemens Networks, Freescale Semiconductor Inc. and Unisem all reported no injuries to their staff and only minor superficial damage to buildings.
The China government has announced a number of initiatives to help survivors cope with this massive human tragedy and help to fund the reconstruction programme, which will be extensive. The technology industry has been extremely lucky to have escaped the devastating effects of this massive earthquake. Hopefully it will bring some stability to this decimated region and provide some hope for the future of the traumatised population of Sichuan.
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