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At Power 2001...

China - The Premiere Base for Rechargeable Batteries
by Shirley Georgi

“China will have the largest Lithium-ion production base in the world,” announced Dr. Huanyu Mao of Tianjin Lishen Battery Corporation at Power 2001. It seems as though all the major Japanese manufacturers are turning to China to have their batteries built so they can sell them at competitive prices. Recently, NEC Mobile Energy signed a Lithium-ion battery contract with Tianjin Battery.

In November, Hitachi-Maxell Ltd. transferred several production lines of Lithium-ion batteries from its Kyoto Works in Japan to its Wuxi Maxell plant in China. There, they will produce 500,000 units of Lithium-ion cells per month. Ted Ozawa, a vice president of the Company said, “The movement of production lines to our Wuxi plant makes Maxell’s Lithium-ion cells more competitive and provides Maxell with a logistical advantage for managing the increasing demand for its cells from the emerging market of several Asian countries, including China, Malaysia and Singapore, as well as the United States.

Sony, which originally built a plant in April in Wuxi, Jiangsu Province (in China) for producing batteries, will now extend its production capabilities and manufacture personal computers. Sony will be the first Japanese manufacturer to do so.


 Dr. MAdobe Photoshop Imageao of Tianjin Lishen Battery thoroughly reviewed the manual manufacturing process and emphasized its low cost and high flexibility. However, low cost did not equate to mediocrity. As the illustration suggests, attention to details is critical in their operation. (This chart is provided through the courtesy of Tianjin Lishen Battery. ) +        


Dr. Mao of Tianjin Lishen Battery thoroughly reviewed the manual manufacturing process and emphasized its low cost and high flexibility. However, low cost did not equate to mediocrity. As the illustration suggests, attention to details is critical in their operation. (This chart is provided through the courtesy of Tianjin Lishen Battery. ) +

China - an economic climate with enticement

China, having 1.2 billion people or one fifth of the world’s population, is receiving a starring role on the world’s stage when it comes to manufacturing. Foreign companies have been encouraged to invest and set up businesses in China. Foreign investments have reached almost $4.3 billion. The country has imported advanced manufacturing technologies to make this happen. Cahners InStat Group projects that the Chinese electronics market will move into third place by 2003, ranking 6th in the world in 1999.1

Major exports in the computer sector, including peripherals, subassemblies and parts such as batteries have provided significant opportunities for both foreign and domestic manufacturers . Exports in this sector grew approximately 76 percent from 1991 to 1996, followed by 42 percent in 1997 and 35 percent in 1998. 1
The labor market is still relatively cheap with a plentiful supply of workers. High school graduates are eager to receive training and work for the high tech firms. “[New recruits] have no tradition of old-style manufacturing and move right into Flextronics’ training school,” said Tim Dinwiddie, general manager at the Singapore-based company’s Zhuhai, China operations. “Four weeks later they’re put on the manufacturing floor and do a great job.”2 When compared to Malaysia, China’s labor and overhead are cheaper. When Chinese labor expenses are compared to Mexico’s, China’s rates have stayed the same whereas Mexico’s have risen. Even skilled labor for R&D is cost effective. Yukio Shohtoku, head of China operations at Matsushita Electric Industrial Co. Ltd., said, “Skilled labor is low cost and fairly plentiful, so it makes sense for us to expand R&D [in China].” Although specific numbers for cost comparisons were not given, P.K. Chan, head of China operations at San Jose-based Sanmina Corporation noted that China has a ten times direct labor savings when compared with Hong Kong. 2
Although most sources, including Stella Li, of Byd Battery Ltd., do not feel that China’s admittance into the World Trade Organization (WTO) will have an immediate effect, most global businesses are heralding the event for long term goals in business and trade. Vice Trade Minister Yoshihisa Oshima of Japan said, “China’s entry means the WTO is now an even more universal organization. It also has a profound implication on strengthening the multilateral trade system and deepening bilateral economic ties with Japan.”3

China - the global manufacturing capitol

Dr. Mao of Tianjin Lishen Battery Corporation spoke at Power 2001 to inform global portable manufacturers about the high quality production of Lithium-ion battery manufacturing techniques in China. He reviewed the manual, semiautomatic and fully automatic process of producing batteries. He said his company can do any of the three techniques. He described the fully automatic process as having high cell consistency as well as high quality. Dr. Mao said, “Tianjin has adopted fully automatic techniques by importing all equipment from Japan.” He noted that the semiautomatic process also has high cell consistency and quality, but it also has a more moderate cost than the fully automatic process.

For the past 4 years, BYD Battery, the largest rechargeable battery company in China, has been growing by leaps and bounds. (See BD #28-1.) To date, their main business has been in exports (95%), but now they are looking to their own country as a attractive business opportunity. Stella K. Li of Byd provided attendees at Power 2001 with an update on the rapidly developing Chinese market in rechargeable batteries.

Cell phones -China is still a booming market for cell phones. Currently, there are about 140 million subscribers, but that figure is scheduled to rise to 250 million by 2005. The market handset price for the consumer equates to about US$160-180 which Chinese consumers in the larger cities are able to afford. The price for airtime is comparable to the fixed line telephone. The personal handyphone sets’ (PHS) net for cellular connections is covered quite well in some provinces, but the target is to improve roaming throughout all of China. (PHS is a limited form of mobile service that offers faster speeds but narrower coverage than conventional services.) Sanyo reported that they will be shipping 200,000 PHS handsets to China this business year. This is a 30,000 increase from last year’s shipment.5


Graph courtesy of BYD Battery

CDMA is a great opportunity for new cell phone producers; by 2004 the estimated number is approximately 33 million. To date, 19 manufacturers have CDMA licensees in China. Domestic producers are backed by large global businesses from other countries. For example, Beijing Shouxing is supported by Nokia and Kejian by Samsung. Motorola is targeting 30-40% market share.

Laptops -Laptop manufactures are moving to China. Toshiba’s output plan is for 1.5 million; Quanta’s output for Shanghai is 2 million. Acer just started their laptop production line in Jiangsu in the fourth quarter of 2001.
Sony is assembling and selling its Vaio brand notebook personal computers in China with hopes of eventually capturing the world’s fourth largest PC market. The Nihon Keizai Shimbun business daily reported that initial volume would probably be less than 200,000 units per year. Using their existing facility at Wuxi, Jiangsu Province, shipments will be made directly to retail outlets in Beijing, Shanghai, Guangzhou and Shenzhen. Retail prices for the high-end notebooks are listed as selling for US $2,885.00. Keiji Kimura, president of Sony’s Mobile Network Company, said, “Creating the market will be the objective at the initial stage.”

Several Chinese PC makers, including Legend Holdings, Ltd., traded on the Hong-Kong exchange, will sell less expensive laptops with fewer features for less than 10,000 yuan (approximately US$1,200.00). 4

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Graph courtesy of BYD Battery

China - rechargeables needed domestically

Stella Li emphasized how the newly expanded Chinese markets will need rechargeable batteries with improved performance, high capacity and longer cycle life. As indicated in other technical presentations, new materials and new advanced technology could help keep the costs down. However, Stella did say that Lithium-ion was not the total solution; rather, she indicated that Nickel-cadmium and Nickel-metal hydride would play a role, too. Multipurpose portables, application and costs would determine the choice of power.

China -a rainbow of promise?

When one considers the total population of China at 1.2 billion people, the figures for China’s growth for portables are modest. Even by year 2005, Stella Li’s projections indicate that there will only be 250 million cellular subscribers, a number which correlates to less than one-fifth of the population. Since 70.8 percent are rural people, who are not nearly as affluent as many of the city dwellers, it is difficult to predict how steeply the market might continue to escalate for areas beyond the large cities.

But for now, the numbers are looking good. In 1999 only seven percent of the country’s people had mobile phones, and less than one percent had PCs. By 2001, the number of cellular phones almost tripled in two years. PC growth in China has been experiencing a 30% annual growth ; International Data Corp. (IDC) said China’s PC market grew 13 percent during the third quarter of 2001. Sony is attracted to China because of the current robust growth , while PC sales in Japan are falling.4 The potential jackpot in China is huge, not only as a base for exports but also for domestic sales, because China’s people want connectivity with portables. With China’s entrance into the WTO, there is no doubt that the race is on for both domestic and foreign manufacturers to establish a strong foothold in a country with one-fifth of the world’s population.

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Time is of the essence. BYD is reducing product development and cycle time.
(The chart is provided by the courtesy of BYD Battery.)
References:

1 “Chinese Electronics Market Will be 3rd Largest by 2003” by Peter Fabris, Electronic News, 11/20-/01
2 “Eye on China- Feeding Tigers, Riding Dragons” by Drew Wilson, EBN, 04/23/01
3 “Japan hails new trade round, China WTO entry” by Shinichi Kishima, Reuters (Tokyo) 11/15/01
4. “Sony Introduces High-Priced PCs to China,” Reuters (Beijing) 11/16/01
5. “Sanyo Electric Faces Handset Hurdles Overseas” by Edmund Klamann, Reuters (Tokyo) 07/19/01 BD