SHENZHEN, CHINA – The
HKPCA Show, the 2008 International Printed Circuit & Electronics Assembly Fair, opened to moderate traffic, easing some exhibitors concerns that the economic crisis would put a serious damper on attendance. Presented by the Hong Kong Printed Circuit Association and IPC – Association for Connecting Electronics Industries, the theme this year is “Thrive on Evolution.” The show, in its 7
th year, primarily features material and equipment suppliers dedicated to the PCB fabrication industry, as well as some of the top PCB fabricators in South China.
In his welcome message, HKPCA chairman Mr. Kong Hoi Wing stressed that these are difficult times for the PCB industry in China, as it is in the rest of the world. The challenges of environmental compliance mandates and higher labor costs, coupled with the global financial crisis, will test the electronics industry in the coming year. Organizations like HKPCA will continue to work with stakeholders to help find improved ways to do business.
In an interview, Mr. Kong Hoi Wing and Mr. Dennis McGuirk of the IPC discussed the current situation in China and the actions being taken to support the overall economy and to provide a means for positive growth in 2009.
On the topic of the environment, it was stressed that the standards for environmental pollution control are not new. They have been in place for many years and are some of the strictest in the world. The issue has been that local governments can make adjustments to the discharge levels based on a specific company or regional requirement. Studies done over the past five years have highlighted the negative economic impact of stricter enforcement of pollution regulation in some areas.
One project known as “Green G.D.P” was chartered to recalculate gross domestic product to reflect the cost of pollution. The project was created to measure the performance of officials in China, related to G.D.P and pollution control standards. The project was tabled after initial results indicated that in some provinces, pollution-adjusted growth rates were reduced to nearly zero. With a targeted minimum growth rate of 8% annually, the Green G.D.P. was tabled in 2007.
In the year leading up to the Olympics, China did take some actions to reduce pollution. In a report released in November, the Minister of Environmental Protection, Zhou Shengxian, stated that the amount of pollution was reduced in China during the first half of 2008. COD (a measure of water contamination) was down 2.84%, and sulfur dioxide emissions (tagged to air pollution) were down 3.96%.
These decreases were achieved through a number of sources, including pollution control enforcement and closure of outdated plants. In addition, the government reduced production of some high-energy consuming materials, including steel, electrolytic aluminum and cement. In addition, some projects were not approved based on potential environmental impact. In the first half of 2008, a total of 104 projects, or 314.56 billion yuan (US$46 billion) of investment, were either rejected or postponed due to potential environmental problems.
On the topic of China labor costs, Kong Hoi Wing pointed out that China’s economy is moving from a manufacturing base to a consumer base. Higher salaries and a stable employment situation are necessary components of this strategy. It is apparent that for some companies, demand is already down by 40% to 50%. Regarding capacity, most of the PCB factories in China operate close to a 70% breakeven. Any prolonged decline in demand will stress some companies, and it is anticipated that some will be forced to close. Kong Hoi Wing did not offer any predictions on the percentage of companies at risk of closure.
Dennis McGuirk pointed out that for many Chinese companies that were just coming on line in 2000 or later, this is the first time they have faced a significant market downturn. McGuirk commented that he did not anticipate a significant impact to the US PCB industry because it is not heavily involved in consumer driven electronic PCBs. Military, medical, industrial and the quick turn markets will be less likely to face substantial declines.
The government is taking action to support overall growth with a target of 8% to 9% for 2009. Actions may include subsidies for consumer products to reduce cost to the individual and to increase domestic sales. In November, a 4 trillion yuan (US$586 billion) infrastructure stimulus package, designed to replace the demands for Chinese exports that are expected to decline drastically due to the global economic recession, was announced. The key areas that are earmarked include low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovations and rebuilding from several disasters. The funds, which are equivalent to a fifth of China’s G.D.P. in 2007, are slated for use by the end of 2010.
