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Chengdu: back to business after quake

Posted: 18 Aug 2008 ?? ?Print Version ?Bookmark and Share

Keywords:Wenchuan earthquake? Chengdu? electronics? IC industry?

While the May 12 Wenchuan 8 earthquake in Sichuan province caused innumerable injuries and deaths as well as enormous loss of property, Chengduthe capital city of Sichuan province and the center of the electronics industry in western Chinaremained unscathed.

Most of the electronic industry players in Chengdu are located within the Chengdu High Tech Industrial Development Zone (CDHT). Founded in 1991, it ranks fifth of the 54 high tech development zones nationwide, with over 13,000 enterprises involved in R&D, manufacturing and software development. Key players include Intel, SMIC and SAP. The whole zone is 86.5km2, embracing five major industry groups: ICs, telecom, software, biochemistry and precision equipments. The IC industry includes 55 enterprises that specialize in IC design, manufacturing, testing and assembly, with a total investment of $1.5 billion.

Minimal impact
"On May 12, the day when the earthquake hit Sichuan, Chengdu felt the quake. Most of the enterprises stopped working that day and the next to evaluate losses caused by the quake and ensure the safety of the personnel. On May 13-15, most of the enterprises resumed production," said Zheng Li, deputy director of the committee of CDHT. "At that time, vendors from U.S., Japan and Taiwan reacted calmly, as earthquakes have occurred in those countries. During the quake, there was no destruction to the electricity, water and gas facilities in the zone. But the earthquake affected us, mainly in the fact that negotiations of some investment projects were halted pending evaluation of the impact of the earthquake."

Jiang Bin, deputy director of the bureau of investment service at CDHT, expressed a similar view: "To our knowledge, none of Intel's equipment was damaged. Intel promptly restored production soon after the experts came from the United States to assess the buildings and equipment, and confirmed that there was no damage. Two units of precision equipment from Huawei-Symantec were damaged due to unstable installation. But the problem was promptly solved. Chengdu City does not change its principle that construction projects should be built to withstand six earthquakes, because Chengdu is not located on the earthquake belt. If the anti-quake protection is to be upgraded to an additional level, the total construction cost will increase by 10 percent. But up to the end of 2009, there will be relevant favorable policies, such as reducing the cost of construction registration."

On-site investigation showed that building damage from the quake consisted of a few fallen ceilings and tiles, and crevices in some non-load-bearing walls. "We organized a team of experts to investigate the constructions in the zone immediately after the quake; no problems were reported concerning the main frame of the constructions. The endangered buildings that are to be dismantled did not fall due to the quake either," said Jiang.

Theoretically, earthquakes would impose a great impact on the precision industry, particularly IC foundry enterprises. "SMIC has hundreds of assembly and testing equipment in our fab, some were displaced in the earthquake but did not get damaged. The day after the quake, we resumed production and 70-80 percent of the employees returned to normal working schedules. A week afterwards, 100 percent of production capacity was restored," said K.C. Wong, assistant director of the R&D department of SMIC.

CDHT is the center of electronics industry in Western China.

Chengdu Cension Semiconductor Manufacturing Corp. Ltd is an SMIC-invested IC foundry company focusing on 0.11-, 0.13- and 0.35?m high voltage process technologies. According to the company, their manufacturing equipment encountered no major damage, but accessory facilities such as gas pipes were displaced. When the earthquake struck, about 300 silicon wafers were being produced. The company said they spent about 1 million RMB for repairs, but orders were unaffected.

Being prepared
Chip giant Intel meanwhile, has over 1,600 employees in its Chengdu assembly factory, with a total investment of $525 million and 100 million finished chips exported in 2007. Intel had organized disaster management programs soon after its factories were put into operation, and these were very effective and helpful when the earthquake occured. "Within a few days, our production was restored and we began to arrange our delivery as before; afterwards, our factory operation was not at all affected. We also helped affected staff to apply for relief funds and they are now very emotionally stable," said Gu Yi, government affairs manager of corporate affairs at Intel China in Chengdu. "Recently, our chairman Craig Barrett visited Chengdu to attest that our investment in Chengdu will not change." Intel announced plans to recruit 1,000 more employees in Chengdu in to maximize its production capacity by 2010 to 2011.

The impact of the earthquake on pure R&D and software companies is mainly embodied in R&D process delays, maintenance of ceiling and non-load-bearing walls and psychological effects on staff.

"For two or three days we did not work in the office. We used flexible management. The earthquake caused parts of the ceilings to fall off and had an impact on the R&D process. But on the whole, the buildings in the zone were safe," said Vivinne Zhu, human resource associate at the Chengdu Design Center of Conexant Digital TV Co., Ltd, which specializes in IPTV chip research and the development of application software. "The greater impact is on the employees' psychological well-being, as 99 percent of our staff had never experienced an earthquake before." She is now contacting psychotherapists.

Jiang Bin, Zheng Li and Qiu Xudong have helped enterprises resume regular production.

"After the quake, HQ reduced workload. But at present, none of the employees have used the earthquake as an excuse to delay work," said Wang Yinan, manager at the Chengdu development department of NEC Solutions (China) Co. Ltd, which specializes in software development. "The working process is on the right track now. There are no problems as long as there are no problems with the people."

Completing recovery
As of June 27, the industrial production capacity of Chengdu City had recovered to pre-earthquake levels, according to Chengdu government statistics. Fifty-eight big enterprises and major corporations have recovered their production completely. The statistics also indicated that the industrial growth rate had increased 4.2 percent compared with the same period last year, although in May when the earthquake occurred, it was 23 percent less than expected.

The west park of CDHT is nearest to Dujiangyan City. It is generally a manufacturing area, with a total export revenue of $2.3 billion in 2007 and expected export revenue of $2.8 billion in 2008. "There are 15 large-scale manufacturing enterprises in the west park, with over 7,000 employees. There were no deaths or injuries as a consequence of the earthquake and by May 13, most of the enterprises had restored production," said Qiu Xudong, director of the management office of CDHT Export Processing Zone. "The precision equipment are generally built to withstand earthquakes, so there was no damage reported. From the current perspective, the production capacity in May was lower than before, but by June, it had completely recovered. Since the enterprises in the area are mostly export-oriented, there was no influence on the orders. On the contrary, there was an increase."

Land traffic in Sichuan province was devastated after the quake. Transportation capacity was reserved for shipping disaster-relief materials to affected areas soon after the quake. This resulted in partial breakdown of the supply chain. In addition, there was an abrupt decrease in the number of people traveling to Sichuan, causing airline companies to reduce flights to Chengdu.

"We had some difficulty right after the quake, especially with flight transportation capacity. Many enterprises send their products to Hong Kong and other places, mainly by air transport, but the earthquake caused a significant decrease in the number of people traveling between Chengdu and Hong Kong, thus causing a corresponding decrease in flights," revealed Zheng. "We took the initiative immediately after the earthquake to apply for government subsidies for direct cargo flights between Chengdu and Hong Kong as early as the beginning of July."

Other solutions have been initiated, including naval transportation from Beihai City of Guangxi province, the construction of an auxiliary line to the Euro-Asia railways via Lanzhou and even direct flights to the US.

Building a free trade zone
Expediting the building of a comprehensive free-trade zone is another important measure taken by CDHT. This zone will comprise an integrated concentration of processing, logistics, custom and trade. "We have already filed an application with the State Department and hope to achieve this target around September," said Zheng. "The comprehensive free-trade zone is a major step of CDHT in the future," commented Qiu. At present, Suzhou in Jiangsu province has built the first comprehensive free-trade zone in China.

On June 13, CDHT held a contract-signing ceremony with 13 enterprises including Kingsoft Digital Entertainment, introducing 12 billion RMB of investment, which will push through after the quake, as previously planned. Other companies were Tencent, Singapore ASM, New Light Silicon. The 4.5 generation TFT-LCD factory of BOE Photoelectric Technology Co. Ltd, the OLED production line of Sichuan Changhong Electric Co. Ltd and the Monolithic Power Systems Inc. have invested or increased investment.

Intel's Chengdu factory had emergency measures in place when the quake occurred.

"The earthquake had some negative effects on CDHT, and Chengdu has been financially affected. Some enterprises slowed down their pace," said Zheng. "By adopting every effective measure possible, we have quickly restored production capacity in the zone to 100 percent, which greatly boosts the confidence of investors. Our investors' policies do not change, because Chengdu does not change, and the geological structure is also stable."

While the earthquake has created a great crisis for the nation, it has also brought out the best in it, and boosted love and confidence among its people.

- EE Times-China

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